Sustainable development report 2015 | Annual report 2015

Sound governance



Sound governance

We are committed to doing things right and doing the right thing. We follow a timeless approach rooted in doing good business, treating people fairly and working together to deliver on our promise. As a team, we hold each other accountable and foster a culture of ethical behaviour. As Wealthsmiths™ we believe that anything worthwhile is worth doing in a manner that makes us proud. In this way we are able to transform people’s lives while safeguarding the values that we stand for.

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Governance of sustainability

Sanlam’s Board takes ultimate accountability for the long-term sustainability of the business. Sustainability is central to the way we do business and forms an integral part of regular business reporting. Our Social, Ethics and Sustainability (SES) committee guides sustainability within the various business units, and monitors the progress of Sanlam’s sustainability journey through the sustainability reporting process.

Structure of sustainability management at Group and cluster levels

The Board, through its relevant committees, establishes ‘tight’ management principles for the entire Group and provides oversight and strategic guidance for each cluster. The Group maintains, monitors and enforces internal compliance with Sanlam’s Code of Ethical Conduct and external compliance with applicable laws and industry regulations. The Group establishes and enforces its policy for combating financial crime through the Group Forensic Services unit, together with the forensic services departments of the business clusters. Grievance and disciplinary procedures are also maintained at Group level.

At cluster level, a chief executive, supported by an executive committee, is responsible for managing the cluster and executing the strategy approved by the cluster Board and supported by the Sanlam Board. Compliance with the Group-wide ‘tight’ management principles and Sanlam’s Code of Ethical Conduct is monitored by quarterly reporting to the Group on ethics and compliance.

Business units have their own boards and executive committees that structure their activities within appropriately delegated authority levels.

Key Performance Indicators



Sanlam acquires stake in Saham

Sanlam, along with its short-term insurance subsidiary, Santam, has acquired a 30% stake in Morocco- based Saham Finances, which operates in 26 countries, predominantly across Africa and the Middle East. The transaction, valued at about R5,3 billion, is one of the Group’s biggest to date and is set to expand Sanlam’s footprint in attractive new markets in North and West Africa. Saham Finances, one of Africa’s largest insurers, is the market leader in most of the countries in which it operates, writing mostly non-life with some life business. The continent’s growing population, improved political landscape, and evolving financial markets and regulatory environment support Sanlam’s vision of being a leading pan-African financial services company. The transaction was completed in the first quarter of 2016.
 




Sound governance material issues

We focus on the following material issues:

Stakeholder engagement

Stakeholder concerns mapped and prioritised by the SES committee and driven by Sanlam’s Sustainability Management Framework (SMF).

Business ethics

No material breaches of business ethics. Focus in 2016 on applying Sanlam’s ethical culture in the work context. Building ethics with regional partners ongoing.

Consumer protection and data privacy

Sanlam is well prepared for implementation of the Protection of Personal Information (POPI) Act. Party due diligence (PDD) legislation as yet uncertain

Executive leadership selection and training

Leadership programmes are driven at both Group and cluster levels to ensure that current and future leaders demonstrate the capabilities to drive accelerated strategy execution in a relevant and distinctive way. In 2015, 34 executives completed the executive leadership programme.

More detail in the 2015 annual report

Executive remuneration, incentives and benefits

Sanlam’s remuneration philosophy and policy support the Group strategy by aligning predetermined strategic goals with the organisational behaviour required to meet and exceed these goals.

More detail in the 2015 annual report

Risk management

The Group is proactive in understanding and managing the risks it is exposed to and ensures that capital is allocated where most value can be added for the risks assured.

More detail in the 2015 annual report




Stakeholder engagement

Oversight of Group-wide engagement


Each cluster is tasked with managing stakeholder engagement in accordance with their business operations. This includes understanding the needs and demands of clients, engaging with the regulatory framework impacting on each business, developing employees and suppliers, as well as responding to the concerns of broader society impacted by the business unit operations.

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Following the adoption of a stakeholder communication policy in 2013, we developed a strategy to guide how we engage with stakeholders in line with King III principles. Every quarter, each business cluster is required to report back on all stakeholder engagement activities, noting concerns raised and the current status of issue management. Feedback from all the clusters is consolidated with the most important issues highlighted and reported to the SES committee. Critical concerns requiring resolution at an executive level can then be incorporated within the SES committee feedback to the Board.

Examples of issues that have emerged from our stakeholder engagement process include:

  • Sensitivities and challenges within organised labour where we manage significant assets
  • The impact of transformation issues on institutional investment
  • Engagement with the Association for Savings and Investment South Africa (ASISA) on the Retail Distribution Review (RDR) legislation
  • The release of draft regulations on retirement defaults, and the process of engaging with stakeholders, such as National Treasury.
  • Implementation of the Solvency Assessment and Management (SAM) framework, dependent on the enactment of the Financial Sector Regulation Bill, the Insurance Bill and subordinate legislation
  • Informing clients about developments relating to a merger between SIM Global (SIMG) and SIM Unconstrained Capital Partners (SUCP) to form a new entity under Sanlam Investment Holdings called Denker Capital
  • Offering active and former clients of Sanlam Private Wealth UK a full review of business affected by unclear disclosure of fees associated with the transfer of their funds to a Discretionary Fund Management (DFM) service.

At present the process of gathering and reporting on stakeholder issues is controlled centrally. In future the plan is to contain issues in a stakeholder hub where the status of engagement can be logged and retrieved. The process and protocols for treating confidential information still need to be resolved before the change will be effected.


Stakeholder engagement road shows


The Sanlam leadership holds annual forums in each of the nine provinces where Group strategy, economic transformation and financial results are discussed with clients, shareholders and key societal stakeholders in each geographic region. These events are often co-hosted with the local university to reach a wider and more engaging audience.







Industry advocacy and representation through industry bodies


To ensure that we play a constructive role in the development of national policy and regulation, we engage actively with the government, primarily as a collective through industry associations such as ASISA, the South African Insurance Association (SAIA), Business Unity South Africa (BUSA), Business Leadership South Africa (BLSA), the Black Management Forum (BMF), the National Economic...

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Development and Labour Council (Nedlac), the National Business Initiative (NBI) and various business chambers. We have been particularly active in the work of ASISA, with the Sanlam Group Chief Executive being an ASISA board member and other executives and senior managers represented on all the ASISA standing committees and working groups.

Our industry representation also serves to connect us to the views of key stakeholder groups and provides a valuable two-way communication opportunity to share experiences and to influence views, behaviours and actions.

Engagement to confirm issue materiality


In 2014 we undertook an internal engagement process to confirm the materiality issues which are critical for our business. In this process we called for feedback from management within the Sanlam Personal Finance (SPF) business cluster. This year we extended the engagement by seeking input from management in the Sanlam Investments (SI) and Sanlam Emerging Markets (SEM) business clusters. We also elicited feedback and inputs from a range of identified future leaders within our business.

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Management was asked to rate the materiality of issues, in terms of the extent to which the issue could impact Sanlam’s financial performance, regulatory compliance, stakeholder expectations and innovation, growth or competitiveness. Ratings were applied to both medium and longer term scenarios. The responses were then mapped against the level of business response to issues, in order to gain insights into the relationship between management effort and issue materiality.

The outcome of the materiality assessment was used to confirm the inclusion and prioritisation of issues within the Sustainability Management Framework (SMF). Our intentions are to broaden the rating of issues in future years to external stakeholder groups.

Sanlam’s Sustainability Management Framework (SMF)


Sanlam’s commitment to its sustainability journey and culture is encapsulated in the Wealthsmiths brand and The Sanlam Way. Our Sustainability Management Framework (SMF) provides the structure for identification, management and reporting on issues that collectively support our value system.


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The SMF is the outcome of a process designed to prioritise the most material issues that require a strategic response from the Group in order to build sustainable value. This initially served as a reporting framework, but in 2014 it was repositioned as an internal management tool.

View Sanlam's SMF

The SMF is refined continually, based on input from the business, and subjected to the scrutiny of the SES committee for review and approval. SES committee reports are structured to ensure holistic oversight of the Group’s material issues.

The SMF has thus far provided an effective structure for oversight of and reporting on sustainable practices. However, management of sustainability is necessarily owned and driven by the business functions within the various clusters. We have made good progress in some areas in ensuring alignment between how the business manages and reports internally on issues incorporated within the SMF. For other issues, there is still work to be done in agreeing on common measurement protocols and describing performance consistently across different business clusters.

Through ongoing engagement with issue ‘owners’, we hope to improve the integration between the framework and existing internal structures. In particular we aim to resolve challenges in standardising metrics across business clusters, geographies and peers within the industry.





Business ethics

Fostering a culture of compliance and ethical behaviour


An ethical organisation cannot focus on regulation alone. Our directors, executives and senior managers take responsibility for creating, fostering and promoting a positive organisational culture of integrity. We broadcast Sanlam’s core values and ethical principles through all our internal communication channels and publications.

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Embedding the right culture and values requires that we educate and instil the importance of integrity, ethics and professionalism into all our employees.

The Sanlam Group strives for high ethical standards and has a long history of professional and ethical behaviour, which we entrench throughout our organisation, including subsidiaries, via our core values and our Code of Ethical Conduct (the code).

The key principles underlying our code are:
  • Ensuring that our conduct at all times conforms to Sanlam’s values
  • Complying with all applicable legislation and regulations
  • Fostering and maintaining an equitable and sustainable employer/employee relationship, including the provision of a safe, healthy and productive working environment
  • Protecting and maintaining the property and information of Sanlam, its employees and its clients
  • Managing and mitigating all conflicts or perceived conflicts of interest
  • Protecting any person who reports violations of the code.

Governance and accountability structures


The Sanlam Board has overall responsibility for the establishment of a corporate culture that will ensure good corporate governance, ethical business practices and adherence to all compliance requirements. In adopting the Group’s Compliance Charter and Policy, the Board has formally acknowledged this responsibility.

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All levels of management and employees have a responsibility to ensure good corporate governance, ethical business practices and compliance with all mandated requirements.

Regulatory compliance is reported on in more detail in the 2015 Sanlam Group Annual Report.

Culture of compliance training


Individual business operations are responsible for ethics training, supported by the Group Compliance Officer (GCO). Periodic (usually annual) and mandatory electronic ethics and compliance training programmes are facilitated through our SAP human resources system.

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This process is also used as a platform to ensure that employees are familiarised with the most relevant regulatory developments.

During 2015, 63% (2014: 66%) of all Sanlam Personal Finance (SPF) employees took part in one or more of the following Culture of Compliance programmes: Treating Customers Fairly (TCF), Compliance Policy, Conflict of Interest, Operational Health and Safety, Code of Ethical Conduct, Competitions Act, Know Your Business exams and FICA, among others.

Reporting ethical breaches


Any of Sanlam’s stakeholders can report perceived incidents of misconduct and ethical breaches to Sanlam.


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View reporting channel chart

Since the introduction of the fraud and ethics hotline in 2001, we have logged a total of 275 calls. Of these, less than 10% of all callers felt the need to remain anonymous. No confirmed material breaches of ethics were reported for the Sanlam Group in 2015.

Based on an ethical culture assessment conducted by EthicsSA in 2015, ethics interventions in 2016 will focus on increased interaction between management and staff on the practical aspects of applying Sanlam’s ethical culture in the work context, and further encouraging the reporting of all concerns of perceived misconduct or ethical breaches.

Emerging markets ethics and compliance


Sanlam Emerging Markets (SEM) gains access to emerging markets through trusted implementation partners, capitalising on the partners’ distribution footprint and understanding of local market conditions. Sound ethics and compliance with local regulations are at the top of our priority list.

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Our SEM governance framework policy, which we apply in our emerging markets businesses, was developed and adopted by the Sanlam Board in 2014. Initially, this governance framework policy comprised four elements:
  • Internal audit and compliance
  • Reporting
  • Risk and capital management
  • Information technology.

During the reporting year, we added two additional elements to the governance framework policy:
  • Brand
  • Human resources.


Branding


Following the Sanlam brand refresh and the launch of our new brand in South Africa during 2014, we started rolling out our new brand strategy to SEM countries in 2015 in line with the Sanlam Group’s brand strategy.

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SEM aims to ensure regulatory compliance in emerging market businesses in line with the rest of the Group, which operates under the guidance and authority of King III and South Africa’s Companies Act. When it comes to ethics programmes and training, our level of influence varies depending on the strength and maturity of the target investments in the different emerging markets.

Compliance with the Sanlam Group’s governance framework is compulsory for all our SEM subsidiaries and we expect subsidiary boards to adopt the Sanlam Group Code of Ethical Conduct and establish appropriate channels to raise concerns and to report incidents, which we respond to.

For more information, refer to the 2015 Sanlam Group Annual Report.





Consumer protection and data privacy

Changing approach of regulators


Regulators in jurisdictions where Sanlam operates are increasingly moving away from rules-based regulation in favour of principle- or outcome-based regulation. Adapting to this changing approach can be challenging, but it also allows an organisation with a strong ethical culture more freedom to decide how it will deliver the desired outcomes.

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We appreciate that principle-based regulations focus on the intended outcome of the regulation, rather than on expected or disallowed practices which the regulator deems will achieve or deter the intended outcome. The principle-based approach allows us to respond to regulation in the context of the situation by setting our own control objectives sympathetic to the regulation and to implement suitable and relevant controls to achieve the intended outcome.

Establishing a strong culture of integrity and ethical business practices forms the basis of Sanlam’s approach to implementing principle-based regulation. This is complemented by an assessment and analysis of the risks that the regulation seeks to address to enable us to formulate an appropriate response.

Party due diligence (PDD)


The party due diligence (PDD) project is aimed at improving Sanlam’s ability to combat money laundering, the financing of terrorism, corruption and bribery, and tax evasion. International regulatory measures aimed at combating money laundering and corruption and bribery respectively are examples of increasingly principle-based regulation.

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Our main obstacle to finalising the PDD project remains the uncertainty around local regulatory reforms. National Treasury has tabled a draft amendment bill in Parliament aimed at the alignment of South African anti-money laundering regulations with international standards. It remains uncertain how these proposed amendments will become effective and how regulators will expect financial institutions to implement these.

Privacy protection project


The privacy protection project is aimed at ensuring Sanlam’s compliance with data protection regulations – specifically the Protection of Personal Information (POPI) Act of 2013. Although POPI was enacted in 2014, no indication has been given as to when the legislation will come into effect. Sanlam’s final response to POPI is dependent on the regulations to be issued in terms of the Act as well as the industry codes of conduct provided for in POPI.

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A final draft of the POPI Code of Conduct for the non-banking financial services sector was approved by the Regulatory Affairs Board committee of the Association for Savings and Investments South Africa (ASISA) in November 2014. This draft code will be presented to the regulatory authority (Information Regulator) to be established under the POPI Act for approval as soon as the Information Regulator has been appointed.

In the interim, Sanlam has prepared for implementation of the POPI Act while we wait for the promulgation of the effective date of the Act. Draft versions of relevant documentation were prepared to align with the POPI Act principles and the draft ASISA code. The prepared documents have been discussed with all stakeholders in the Group. The Group Compliance Office has also assisted Sanlam’s business clusters in their response to queries from external stakeholders regarding our approach to meeting the requirements of this legislation.

Once the detailed compliance requirements under the POPI Act are issued, these documents will be finalised and submitted for approval.