Will the Wells Fargo Settlement Actually Result in Change?

In some of my prior articles on reputation and positive risk culture, I’ve sometimes referred to the ongoing Wells Fargo saga.

From 2002 until coming to light in 2016, the company engaged in a variety of fraudulent activities. Unrealistic sales targets aggressively pushed by leadership led many employees to create thousands of bogus accounts. The fraud generated millions in fees for the bank, but also damaged customer credit ratings in some instances.

Insiders referred to these abusive practices as “gaming.”

There were no boundaries or oversight of employee behavior. Management essentially condoned the behavior with the expectation that employees will do what they have to do to meet the targets. Little consideration was given to how the fraud would impact customers and the company’s reputation.

Last week, it was announced that Wells Fargo and the U.S. Department of Justice reached an agreement where the bank will pay a $3 billion fine but also avoid criminal charges provided the bank continues to cooperate with other probes and investigations.

In a statement announcing the settlement, U.S. Attorney Andrew Murray explains:

Our settlement with Wells Fargo, and the $3 billion criminal monetary penalty imposed on the bank, go[es] far beyond ‘the cost of doing business. They are appropriate given the staggering size, scope and duration of Wells Fargo’s illicit conduct.

The settlement is not the end of Wells Fargo’s legal troubles – other civil charges are pending against eight former senior executives and the bank is still under a growth cap imposed by the U.S. Federal Reserve.

Will this settlement actually lead to change at the company?

While the U.S. Attorney and the general public consider $3 billion to be a huge amount of money, in the context of such a large company, it really isn’t all that much. Wells Fargo was already taking steps late last year when it set aside just over $3 billion in anticipation of a settlement.

From a risk perspective, will this fine have a big enough impact to change the company’s behavior?

It’s hard to say, but one thing is for sure, nothing will change unless the tone at the top changes.

If management doesn’t starting working to change company culture and set clear expectations on employees, the fraudulent activities that led to this will come back.

It’s too early to tell if Wells Fargo will follow through, but steps have been taken since news of the fraud broke nearly four years ago. In discussing the settlement, Wells Fargo’s new CEO, Steve Scharf, states:

The conduct at the core of today’s settlements – and the past culture that gave rise to it – are reprehensible and wholly inconsistent with the values on which Wells Fargo was built.

This statement from the CEO is a positive sign, but it’s still too early to tell if the company has truly taken this lesson to heart.

While the settlement amount may seem like it’s enough, cultivating a positive risk culture over the long-term will do far more to ensure Wells Fargo can put this behind them. As I explain here, not being proactive with risk management can lead to consequences far more disastrous than a fine.

Has your organization suffered reputation damage or intense scrutiny from regulators due to a lax risk culture?

As always, I’m interested in hearing your thoughts. Please don’t hesitate to leave a comment below or join the conversation on LinkedIn.

And if your organization is struggling to develop a positive risk culture or otherwise feeling the impacts of not being proactive in risk management, contact me to discuss your specific situation today.

Sign Up For Our Newsletter

Sign Up For Our Newsletter

SDS-Logo
about-sidebar-v2

Meet Carol

Helping companies achieve their vision and strategy, and succeeding in today's turbulent world, is something I'm honored to be a part of. Whether you're an occasional blog visitor or a long-term client, thank you for letting us be a part of your journey.

Most Recent Posts

The 12 Days of ERM Christmas

Without a doubt, one of my family’s favorite holidays is Christmas. Part of the fun, especially for our son, is seeing what “Santa” brought, but most importantly, we treasure the spirit of peace and goodwill the season brings. And after what seemed to be a never-ending warm spell, the weather is expected to be good…

Read More

Don’t Let Goals and Initiatives Be Blindsided by External Events

As the end of the year draws near, I think we’d all agree that while it wasn’t without its challenges, this year also wasn’t quite as turbulent as the previous two. While a lot of people are juggling company parties, shopping for friends and family, and special activities for the kids, most companies are putting…

Read More

Going the Distance: Ensuring Successful Execution of Strategic and Annual Initiatives

Strategic planning is a challenge – of all people, I understand… After all the meetings, risk and data analysis, and brainstorming of the preceding months, it’s tempting to think this is the end of the road and you can relax. Contrary to this common perception though, this is exactly not the time to relax, but…

Read More

Avoid Rookie Mistakes and Protect your Internal Reputation

Be honest – have you ever done something that you soon realized was a real rookie mistake? Me raising my hand… Considering the nature of ERM’s role to ask questions and challenge assumptions (often during conversations with executives), it can be argued that, in at least some cases, the expectations bar for risk professionals is…

Read More

ERM at Thanksgiving – An Illustration of Risk Management in Action

On occasion, I like to take some of the concepts we risk professionals think about in our jobs and apply them to different personal situations…take some of the same concepts we use when working with executives to develop corporate strategy and manage risks or uncertainty around that strategy. It’s Thanksgiving week in the U.S. –…

Read More

Why Quantitative Risk Assessment is Not Just the Best But the Only Option – A Conversation

Periodically, I have the pleasure of speaking one-on-one with Hans Læssøe on a variety of topics around ERM, strategic risk, and other issues and trends. As you know from my previous conversations (here, here) and posts featuring his work, Hans was formerly a practitioner at the iconic LEGO Company, but even more notably, is a…

Read More

The Three Lines Model – 3 Reasons Why I Don’t Like It

Everyone likes a clear-cut template that offers an easy way to create or manage something…I mean what’s not to like about a step-by-step process for accomplishing what you want? Sometimes this can work without any issues, such as the case with the Project Management Book of Knowledge (PMBOK), ISO 9001 standard, or a new cooking…

Read More

5 Avenues for Expanding your ERM Knowledge

One thing I was taught to appreciate from a young age was the value of education and knowledge. It didn’t necessarily matter what the subject was, just that I always maintain a learning or growth mindset regardless of my current status in life. This mindset has served me well over the years, and it’s a…

Read More

Storytelling and Risk Management – Developing Skills that Technology Cannot Replace

It’s amazing how technology has developed and changed our working world over time. Imagine trying to run my risk and strategy consulting firm without tools like Zoom, Box, Slack, and other ERM-specific technology tools. There is no way we would be able to serve our clients the way that we do. Just consider how the…

Read More

3 Phases to Creating and Launching an ERM Program Focused on Organizational Success

If you’ve been handed the task of creating an ERM program for your organization, let me first offer my congratulations quickly followed by my empathy for the task ahead of you. I don’t say that to scare you but to provide a small dose of reality. Building, launching, and refining an ERM program that is…

Read More