The governance risks boards can’t ignore

Corporate misconduct risk heightened in 2025, as evidenced by high-profile systemic governance failures across the Banking, Mining, Technology and Higher Education sectors. From financial crime investigations, workplace misconduct, and underpayments to alleged market manipulation, procurement fraud, insider risk, and whistleblower complaints, we expect these risks to grow. Key drivers are ongoing concerns about organisational cultures, conflict management, board transparency and accountability, and as regulatory bodies prioritise greater enforcement of directors’ duties.

Trends in corporate misconduct have coincided with increased regulatory activity. ASIC has increased resources and announced its 2026 enforcement priorities including private credit and predatory credit practices, financial reporting misconduct, insurance complaints and claims handling, auditor misconduct, and strengthening the prosecution of insider trading. For boards, governance failures can result in regulatory action, major financial penalties, loss of valuable employees, and lasting damage to enterprise value and reputations.

The growing sophistication of fraud

Cost of living pressures and elevated insolvency appointments have created a challenging operating environment for lenders and corporates.

At the same time, external fraud against bank and non-bank lenders is increasing, with organised groups exploiting these vulnerabilities across credit origination, asset finance, and commercial property transactions. On the law enforcement front, operations such as Elbrus and Strike Force Myddleton have highlighted the growing sophistication of criminal enterprises involved in PAYG payroll frauds and fraudulent loan schemes. We also expect a continued uptick in organised crime activities targeting the general insurance, NDIS, and construction sectors.

The reality is fraud threats will increase in both scale and frequency; organisations must be proactive in their detection and response.

Monitoring financial market integrity

ASIC continues to monitor financial markets integrity, examining market misconduct and insider trading allegations. Treasury is advancing reforms to create greater transparency in beneficial ownership and to combat corruption, tax evasion, money laundering, and terrorism financing. Meanwhile, the Australian Transaction Reports and Analytics Centre (AUSTRAC) will provide enhanced oversight under the Tranche 2 AML/CTF reforms that come into effect on 1 July 2026. ASIC is also emphasising audit quality, independence, and the extent to which management has been challenged on their assumptions. Audit committee effectiveness to ensure risks and professional judgement are prioritised over basic compliance is under the spotlight.

Following the collapse of two major Australian superannuation funds, the superannuation and insurance industries will face heightened scrutiny from the Australian Competition and Consumer Commission (ACCC) of complaints handling processes, opaque decision-making, delays, and instances of poor remediation cultures. Perceived failures will be scrutinised by regulators and the media alike.

Detecting the warning signs

Understanding these themes and the enforcement priorities of regulators like ASIC, AUSTRAC and the ACCC will help executives and their legal advisors respond decisively. To evaluate vulnerabilities and detect the early signs of corporate misconduct, executives must adopt a dynamic, evidence-based approach to monitoring and governance. This will support a strong risk culture, help to recover enterprise value, and build more resilient systems.

Key actions to take

• Map your specific threat landscape – identify where risk concentrates within your organisation and understand evolving tactics.

• Elevate insider risk management – deploy behavioural analytics, enforce least-privilege access and embed a culture of accountability across your high-risk senior roles.

• Address the human factor – invest in targeted training, simulations, and strong whistleblower programs. Reinforce ethical standards and psychological safety to reduce misconduct drivers.

• Engage independent forensic experts – ensure objectivity, avoid conflicts of interest and develop findings capable of scrutiny by regulators, boards, audit committees and the courts.