Introduction
Wells Fargo has been serving customers in the financial sector across the United States for over 150 years. Among the numerous challenges recently faced by the company is the repercussions from a scandal involving fraudulent account opening, which significantly eroded public confidence in the company (Tayan, 2019). This report aims to examine the challenges currently facing Wells Fargo and make recommendations for how they can be overcome.
Problem Diagnosis
The account-opening scandal has caused a significant loss of trust and reputation for Wells Fargo. After the company opened millions of fake bank and credit card accounts, it was fined $100 million in 2016 (Tayan, 2019). The company’s reputation took a significant hit after the scandal forced the CEO and other top executives to resign. The public’s faith in the company was further shaken by its inadequate response to the scandal (Tayan, 2019).
Wells Fargo also has issues because it needs a robust risk management system. The fraudulent account opening that precipitated the scandal could have been avoided if the company had better controls (Hurley & Hurley, 2020). Other problems, such as a close fine for an auto loan and mortgage abuses, and regulatory actions against the company can be traced back to inadequate risk management.
Recommendations
The ethical decision-making framework can be applied to understand the situation. Employees were encouraged to put sales goals ahead of customer needs, leading to unethical behavior and the subsequent scandal (Tayan, 2019). Employees will be more likely to follow established ethical guidelines if the company has a system for identifying and resolving ethical dilemmas. If Wells Fargo follows the recommendations, it can restore its customer credibility and succeed as a financial services provider.
Implement a Robust Risk Management Framework
The Wells Fargo scandal was exacerbated by the bank’s weak risk management procedures (Hurley & Hurley, 2020). Risk identification, assessment, mitigation, and monitoring should all be part of the company’s risk management framework. The framework’s goals should be to forestall fraudulent actions and guarantee conformity with rules and regulations. The company also needs to provide its employees with extensive training in risk management, which should cover topics such as the most recent regulations and risks. As part of their orientation, new staff members should attend a risk management and compliance session.
Improve Corporate Governance
The board of directors needs to establish a risk management committee to ensure the company has a solid system for analyzing risks and developing strategies to deal with them (Hurley & Hurley, 2020). The committee regularly updates the board on the company’s risk management practices. Additionally, the board ought to be composed of objective individuals. Independent board members can bring more transparency to board deliberations and objectivity to company operations. In order to achieve its performance and risk management objectives, the board must ensure that executive compensation is fair and equitable. This can be achieved by linking executive compensation to risk-adjusted performance metrics and long-term strategic objectives.
Enhance Customer Service
In order to regain the confidence of the general public, Wells Fargo should prioritize the satisfaction of its customers. The company must maintain transparency and integrity in its dealings with clients, promptly address their grievances, and ensure equitable treatment. It is imperative that the customer service team be equipped to promptly and resolutely address grievances and that they possess the requisite authorization to take appropriate action (Hurley & Hurley, 2020). It is recommended that the enterprise invests in technology that facilitates secure and user-friendly access to customer accounts and services.
Strengthen Compliance
A compliance team should ensure the company complies with all applicable laws and standards. The team should have regulatory compliance specialists and be led by a senior executive. (Hurley & Hurley, 2020). The team should monitor the legal climate to ensure the company is acting ethically. Businesses must incorporate mandatory compliance training into the onboarding process. Additionally, the company should provide ongoing training to keep employees current with evolving rules and regulations. The consequences for noncompliance include disciplinary action up to and including termination (Hurley & Hurley, 2020).
Conclusion
Wells Fargo has been hit hard by the account-opening scandal. The decline in the public’s trust and the company’s reputation has hurt the business. The only way for the company to succeed in the face of these difficulties is to significantly enhance its compliance function, customer service, corporate governance structure, and risk management framework. Wells Fargo’s credibility and reputation in the banking sector will improve if these measures are taken.
References
Hurley, P. R., & Hurley, R. E. (2020). Lessons from Wells Fargo banking scandal. Academy of Business Research Journal, 2, 78-91.
Tayan, B. (2019). The Wells Fargo cross-selling scandal. Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-62 Version, 2, 17-1. https://ssrn.com/abstract=2879102
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