1 00:00:05,790 --> 00:00:08,070 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean 2 00:00:08,280 --> 00:00:11,010 Sean Aylmer: Aylmer. The Star Entertainment Group just can't stay out of the 3 00:00:11,010 --> 00:00:15,330 Sean Aylmer: headlines. Yesterday, Executive Chair, David Foster, announced his exit from 4 00:00:15,330 --> 00:00:18,239 Sean Aylmer: the group. Last week, he fronted a second New South 5 00:00:18,270 --> 00:00:21,630 Sean Aylmer: Wales inquiry into The Star where he said that, " Despite 6 00:00:21,630 --> 00:00:24,090 Sean Aylmer: remediation efforts, the company was not in a fit state 7 00:00:24,090 --> 00:00:26,970 Sean Aylmer: to hold a casino license." The inquiry had already heard 8 00:00:26,970 --> 00:00:30,749 Sean Aylmer: allegations of conflict between Star management and the regulator- appointed 9 00:00:30,750 --> 00:00:34,500 Sean Aylmer: overseer, including text messages between then CEO, Robbie Cooke, and 10 00:00:34,500 --> 00:00:38,130 Sean Aylmer: Mr. Foster suggesting they were preparing for war. The group's 11 00:00:38,130 --> 00:00:41,280 Sean Aylmer: share price is languishing at or near all- time lows. 12 00:00:41,280 --> 00:00:44,460 Sean Aylmer: Compare that for a moment with Crown Resorts. Crown Sydney 13 00:00:44,460 --> 00:00:47,339 Sean Aylmer: was last week deemed suitable to hold a casino license, and 14 00:00:47,759 --> 00:00:50,189 Sean Aylmer: the Crown Melbourne last month won the right to continue 15 00:00:50,190 --> 00:00:53,549 Sean Aylmer: operating after the Victorian regulator found that that company's system's 16 00:00:53,639 --> 00:00:56,790 Sean Aylmer: failings were in the past. The outcomes of the two 17 00:00:56,790 --> 00:00:59,730 Sean Aylmer: gaming giants couldn't be more different despite having endured similar 18 00:00:59,730 --> 00:01:03,059 Sean Aylmer: public inquiries in recent years revealing money laundering links to 19 00:01:03,059 --> 00:01:07,620 Sean Aylmer: organized crimes and other major deficiencies. So how has it 20 00:01:07,620 --> 00:01:12,419 Sean Aylmer: gone so wrong for Star and so right for Crown 21 00:01:12,510 --> 00:01:15,208 Sean Aylmer: and where to from here? The industry is certainly facing 22 00:01:15,209 --> 00:01:18,840 Sean Aylmer: plenty of headwinds, including cost pressures and lower foreign tourism, 23 00:01:19,050 --> 00:01:21,599 Sean Aylmer: both of which contributed to Crown's announcement yesterday they will 24 00:01:21,599 --> 00:01:24,179 Sean Aylmer: be cutting up to 1, 000 jobs. Peter Deans is 25 00:01:24,179 --> 00:01:27,809 Sean Aylmer: a former chief risk officer at Bank of Queensland and 26 00:01:27,809 --> 00:01:31,920 Sean Aylmer: director and founder of Notwithoutrisk Consulting. He was also the 27 00:01:31,920 --> 00:01:35,789 Sean Aylmer: independent expert advisor to the Victorian and Western Australian Royal 28 00:01:35,790 --> 00:01:39,900 Sean Aylmer: Commissions into Crown Casino. So he knows the space better 29 00:01:39,900 --> 00:01:42,030 Sean Aylmer: than most. Peter, welcome back to Fear and Greed. 30 00:01:42,420 --> 00:01:44,399 Peter Deans: Thanks, Sean. Always good to be here of course. 31 00:01:45,299 --> 00:01:47,759 Sean Aylmer: That was quite the introduction. Normally they're not that long. 32 00:01:47,969 --> 00:01:51,300 Sean Aylmer: But, Peter, there is so much going on in this 33 00:01:51,360 --> 00:01:53,850 Sean Aylmer: space. First, a bit of background. Many of the issues 34 00:01:53,850 --> 00:01:57,690 Sean Aylmer: facing Crown and Star were quite similar, weren't they? The 35 00:01:57,690 --> 00:02:00,029 Sean Aylmer: money laundering, organized crime, et cetera, so they kind of 36 00:02:00,030 --> 00:02:01,530 Sean Aylmer: start at the same point, is that right? 37 00:02:02,490 --> 00:02:07,680 Peter Deans: Oh, look, I think the broader issue for casinos and 38 00:02:07,680 --> 00:02:11,850 Peter Deans: gaming is that even up until recently, they were seen 39 00:02:11,850 --> 00:02:16,320 Peter Deans: as being relatively heavily regulated businesses. Crown in Sydney, for 40 00:02:16,320 --> 00:02:21,030 Peter Deans: example, was given its original license in 2014 and leading 41 00:02:21,030 --> 00:02:25,230 Peter Deans: up to the opening or the planned opening of Barangaroo in 2019, 42 00:02:25,230 --> 00:02:30,150 Peter Deans: there were concerns about Crown's suitability as a license holder. 43 00:02:30,900 --> 00:02:33,269 Peter Deans: That really does go to the core of the issues 44 00:02:33,570 --> 00:02:37,559 Peter Deans: with Crown, which pleasingly both Melbourne and Sydney have been 45 00:02:37,559 --> 00:02:40,199 Peter Deans: given the tick for suitability and a little bit later 46 00:02:40,199 --> 00:02:41,940 Peter Deans: in the piece with the issues that have emerged with 47 00:02:41,940 --> 00:02:46,230 Peter Deans: Star. It's really come about because of this question of 48 00:02:46,230 --> 00:02:50,340 Peter Deans: suitability and whether or not it's money laundering, financial crime 49 00:02:50,340 --> 00:02:55,798 Peter Deans: concerns or responsible gaming concerns or concerns around other aspects 50 00:02:55,799 --> 00:02:58,529 Peter Deans: of the licenses. In the case of Crown, there were 51 00:02:58,590 --> 00:03:02,970 Peter Deans: original concerns about a number of the shareholders. It's an 52 00:03:02,970 --> 00:03:05,430 Peter Deans: industry that's always been under the spotlight. What I think 53 00:03:05,430 --> 00:03:08,669 Peter Deans: we now see now is that the spotlight is, it's in 54 00:03:08,669 --> 00:03:12,149 Peter Deans: real time and people get to see the good, the 55 00:03:12,150 --> 00:03:15,960 Peter Deans: bad, and the ugly of the goings- on within these organizations. 56 00:03:16,440 --> 00:03:21,300 Sean Aylmer: So why is Crown so suitable and Star isn't so 57 00:03:21,300 --> 00:03:23,190 Sean Aylmer: suitable? Is there an easy answer to that? 58 00:03:23,820 --> 00:03:25,650 Peter Deans: Oh look, I think, and I probably should just say 59 00:03:25,650 --> 00:03:29,340 Peter Deans: in addition to my role advising the Victorian and the WA 60 00:03:29,880 --> 00:03:32,609 Peter Deans: law commissions, I did actually help Crown with some of 61 00:03:32,610 --> 00:03:37,710 Peter Deans: the reform program in 2022 and 2023. But the reasons for 62 00:03:37,710 --> 00:03:42,120 Peter Deans: suitability, again, in a very transparent world have been published on 63 00:03:42,120 --> 00:03:46,440 Peter Deans: both New South Wales and Victorian Casino Regulators websites. To 64 00:03:46,440 --> 00:03:50,250 Peter Deans: Crown's credit, both regulators and also in the case of 65 00:03:50,639 --> 00:03:54,360 Peter Deans: Victoria, the special manager said that Crown had done everything 66 00:03:54,389 --> 00:03:56,340 Peter Deans: that had been asked of it. And everything it had 67 00:03:56,340 --> 00:04:01,260 Peter Deans: decided to do post the Finkelstein Royal Commission to effectively 68 00:04:01,410 --> 00:04:05,550 Peter Deans: reform itself, remediate all the issues identified, and it got 69 00:04:05,550 --> 00:04:08,880 Peter Deans: on and did that job both before the Blackstone ownership 70 00:04:08,880 --> 00:04:11,940 Peter Deans: and post the Blackstone ownership. It's a credit to the 71 00:04:11,940 --> 00:04:14,580 Peter Deans: people involved that they just got on and did it. 72 00:04:15,060 --> 00:04:17,670 Peter Deans: And I think as we've seen with Star in recent 73 00:04:17,670 --> 00:04:21,779 Peter Deans: weeks, I think there probably hasn't been the change in 74 00:04:21,779 --> 00:04:24,870 Peter Deans: culture and change in attitude, which a number of the 75 00:04:24,960 --> 00:04:29,039 Peter Deans: people inside at Star have acknowledged that that's necessary to 76 00:04:29,039 --> 00:04:31,890 Peter Deans: undertake what are very challenging programs. 77 00:04:32,940 --> 00:04:36,029 Sean Aylmer: Okay, so if we sit where we are now and 78 00:04:36,029 --> 00:04:39,779 Sean Aylmer: Crown resources come through this process, at least in the 79 00:04:39,779 --> 00:04:43,109 Sean Aylmer: regulator's eyes, in much better shape, but it has come 80 00:04:43,110 --> 00:04:45,779 Sean Aylmer: at a cost. We heard yesterday that 1, 000 jobs will 81 00:04:45,779 --> 00:04:49,290 Sean Aylmer: go, mostly they will be in Melbourne. Part of the 82 00:04:49,290 --> 00:04:52,410 Sean Aylmer: reason given was economics, cost of living, but the other 83 00:04:52,410 --> 00:04:55,980 Sean Aylmer: part was stricter requirements. So obviously there is a cost 84 00:04:56,099 --> 00:04:59,910 Sean Aylmer: to all of this, which both organizations presumably are feeling. 85 00:05:00,928 --> 00:05:03,719 Peter Deans: Yeah, and look, I'm not close enough to Crown to know 86 00:05:03,719 --> 00:05:07,080 Peter Deans: the specific ins and outs of what's caused the job 87 00:05:07,080 --> 00:05:12,360 Peter Deans: cuts other than what's been publicly announced. Clearly the economy 88 00:05:12,870 --> 00:05:16,200 Peter Deans: today is not as good as it was. We've just 89 00:05:16,200 --> 00:05:19,860 Peter Deans: come through Covid as well and so Crown had to 90 00:05:19,950 --> 00:05:21,960 Peter Deans: employ quite a lot of people to get the programs 91 00:05:21,960 --> 00:05:25,080 Peter Deans: of work done. I presume that they were gearing up 92 00:05:25,080 --> 00:05:28,470 Peter Deans: again for more buoyant economic times but higher interest rates 93 00:05:28,470 --> 00:05:33,720 Peter Deans: here and overseas has obviously impacted. I think there's again, 94 00:05:33,779 --> 00:05:39,360 Peter Deans: just the broader economic climate means that all discretionary sectors 95 00:05:39,570 --> 00:05:44,220 Peter Deans: are suffering and gaming, whether it's casinos or totalizer betting, 96 00:05:44,430 --> 00:05:45,810 Peter Deans: I'm sure is not immune. 97 00:05:46,470 --> 00:05:48,330 Sean Aylmer: Stay with me, Peter. We'll be back in a minute. 98 00:05:56,099 --> 00:05:58,799 Sean Aylmer: I'm speaking to Peter Deans, a former chief risk officer 99 00:05:58,799 --> 00:06:03,120 Sean Aylmer: and founder of Notwithoutrisk Consulting, an independent expert advisor to the Victorian 100 00:06:03,120 --> 00:06:08,099 Sean Aylmer: and WA Royal Commissions into Crown Casino. So let's bring 101 00:06:08,099 --> 00:06:13,109 Sean Aylmer: it to Star. At this rate it's very difficult to 102 00:06:13,110 --> 00:06:17,549 Sean Aylmer: see where Star ends up. Whether it continues as a 103 00:06:17,549 --> 00:06:20,279 Sean Aylmer: going concern is a real question, whether it has an 104 00:06:20,279 --> 00:06:24,599 Sean Aylmer: overseer for an extended period. Do you think there's actually 105 00:06:24,600 --> 00:06:26,909 Sean Aylmer: a potential for it to lose its license entirely? 106 00:06:27,990 --> 00:06:30,000 Peter Deans: Well, I think the process as I understand it is 107 00:06:30,000 --> 00:06:33,058 Peter Deans: that the Bell Inquiry will hand down its findings and 108 00:06:33,059 --> 00:06:36,659 Peter Deans: recommendations to the New South Wales Casino Regulator and obviously 109 00:06:36,660 --> 00:06:39,359 Peter Deans: New South Wales Government and so it'll be a matter of 110 00:06:39,360 --> 00:06:43,110 Peter Deans: what that recommendation is. I think the chair of Star 111 00:06:43,680 --> 00:06:47,460 Peter Deans: was on the record last week or the former chair, stating that at this point 112 00:06:47,460 --> 00:06:50,040 Peter Deans: in time, he couldn't disagree that they weren't fit to 113 00:06:50,040 --> 00:06:53,248 Peter Deans: hold the license. So it is hard to know what 114 00:06:53,250 --> 00:06:55,919 Peter Deans: that means. I think as I touched on before with your 115 00:06:55,920 --> 00:06:58,650 Peter Deans: question about Crown though, I think you need to demonstrate 116 00:06:58,650 --> 00:07:02,099 Peter Deans: a change in the risk culture of an organization. I 117 00:07:02,099 --> 00:07:06,178 Peter Deans: think that demonstrable willingness to get done what has to 118 00:07:06,178 --> 00:07:10,920 Peter Deans: be done. I think a couple of Star executives, perhaps 119 00:07:10,920 --> 00:07:14,670 Peter Deans: it's two weeks ago, provided some views on perhaps some 120 00:07:14,670 --> 00:07:17,730 Peter Deans: of the challenges in actually getting things done was that 121 00:07:18,450 --> 00:07:21,059 Peter Deans: the program they had was I think to quote one 122 00:07:21,059 --> 00:07:25,680 Peter Deans: of the executives, " ambitious", and there was also a desire to 123 00:07:26,040 --> 00:07:29,580 Peter Deans: quickly achieve milestones. I think any sort of reform or 124 00:07:29,580 --> 00:07:32,489 Peter Deans: remediation program, whether it's the gaming sector or if we 125 00:07:32,490 --> 00:07:34,800 Peter Deans: go back to the banking sector with the likes of 126 00:07:35,220 --> 00:07:39,809 Peter Deans: Commonwealth Bank's work after its APRA prudential inquiry, these are 127 00:07:39,809 --> 00:07:41,730 Peter Deans: not programs that get done in a month or two. 128 00:07:41,730 --> 00:07:44,940 Peter Deans: They are multi year programs. They take a very strong 129 00:07:44,940 --> 00:07:48,690 Peter Deans: financial commitment and they take a very strong tone from 130 00:07:48,690 --> 00:07:51,540 Peter Deans: the top and management commitment to do everything that's necessary. 131 00:07:51,630 --> 00:07:55,410 Peter Deans: It does seem like from The Star inquiry the last 132 00:07:55,410 --> 00:07:58,170 Peter Deans: couple of weeks, that that's not all hung together at 133 00:07:58,170 --> 00:07:58,590 Peter Deans: all well. 134 00:07:59,610 --> 00:08:03,389 Sean Aylmer: Is it possible, and I'm not advocating for or against 135 00:08:03,389 --> 00:08:05,730 Sean Aylmer: The Star, and I presume you're not advocating for against 136 00:08:05,730 --> 00:08:10,890 Sean Aylmer: The Star. But Nicholas Weeks, who was the regulator's overseer, 137 00:08:11,190 --> 00:08:15,119 Sean Aylmer: is it possible that he overstepped the mark? I don't 138 00:08:15,120 --> 00:08:17,610 Sean Aylmer: even want to make it as personal as that. Crown 139 00:08:17,610 --> 00:08:21,419 Sean Aylmer: said that they managed their regulator in a certain way. 140 00:08:21,780 --> 00:08:25,080 Sean Aylmer: Star complained about their regulator being harder. I don't know whether 141 00:08:25,080 --> 00:08:28,560 Sean Aylmer: that's right or wrong, but there's kind of more to 142 00:08:28,560 --> 00:08:31,800 Sean Aylmer: it than just jumping in on Star here because the 143 00:08:31,800 --> 00:08:34,828 Sean Aylmer: cost of everything that's gone on must be very difficult 144 00:08:34,830 --> 00:08:38,070 Sean Aylmer: to actually make a financial return for shareholders. Obviously Crown 145 00:08:38,070 --> 00:08:40,109 Sean Aylmer: is owned by a private equity group. They don't have 146 00:08:40,109 --> 00:08:42,000 Sean Aylmer: to worry about that as much. The Star does. 147 00:08:42,990 --> 00:08:46,559 Peter Deans: Yeah, I think the Bell Inquiry will provide you with 148 00:08:46,559 --> 00:08:49,920 Peter Deans: those answers on whether or not individuals that overstepped their mark. 149 00:08:50,370 --> 00:08:54,059 Peter Deans: Again, I just think these are very, very difficult programs 150 00:08:54,059 --> 00:08:56,700 Peter Deans: of work to do. And if you are, I think 151 00:08:56,700 --> 00:09:00,149 Peter Deans: this has also come out, if you are somewhat financially 152 00:09:00,150 --> 00:09:03,750 Peter Deans: constrained as Star has been given its debt levels, the 153 00:09:03,750 --> 00:09:08,460 Peter Deans: fact it's publicly listed, the fact that the casino's not 154 00:09:08,460 --> 00:09:10,889 Peter Deans: operating as profitably as it has in the past in 155 00:09:10,889 --> 00:09:14,280 Peter Deans: Sydney, I think it all puts pressure on individuals and 156 00:09:14,280 --> 00:09:17,429 Peter Deans: executives. Perhaps some of the more colorful aspects of the 157 00:09:17,429 --> 00:09:22,980 Peter Deans: inquiry is seeing how people respond under extreme pressure, whether 158 00:09:22,980 --> 00:09:26,250 Peter Deans: it's financial pressure or regulatory pressure. So look, I think it's 159 00:09:26,250 --> 00:09:27,780 Peter Deans: very hard to know. I think it's a matter of 160 00:09:27,780 --> 00:09:32,309 Peter Deans: seeing what the Bell Inquiry comes out with because it 161 00:09:32,309 --> 00:09:34,140 Peter Deans: does need to answer some of these questions. 162 00:09:34,920 --> 00:09:37,319 Sean Aylmer: So what's the moral of the story, Peter, you run 163 00:09:37,320 --> 00:09:40,800 Sean Aylmer: not without risk consulting? So obviously you're an expert on 164 00:09:40,980 --> 00:09:45,660 Sean Aylmer: risk and you've advised Royal Commissions. What is the moral 165 00:09:45,660 --> 00:09:49,199 Sean Aylmer: of this for management, for CEOs? Not even just, I'm 166 00:09:49,200 --> 00:09:51,479 Sean Aylmer: not only talking about The Star and Crown here, just generally. 167 00:09:52,199 --> 00:09:54,869 Peter Deans: Yeah, look, I mean, there's a lot that gets written 168 00:09:54,870 --> 00:09:58,319 Peter Deans: about. There's no one single thing, there's no one silver 169 00:09:58,320 --> 00:10:01,260 Peter Deans: bullet. It's a matter of getting the right governance at 170 00:10:01,260 --> 00:10:03,990 Peter Deans: a board level, getting the right sort of risk culture, 171 00:10:03,990 --> 00:10:07,110 Peter Deans: getting the right risk frameworks in place. I think certainly 172 00:10:07,110 --> 00:10:11,518 Peter Deans: aligning remuneration of executives to whatever the desired outcomes of 173 00:10:11,520 --> 00:10:15,000 Peter Deans: the organization are. All of them need to be working. 174 00:10:15,030 --> 00:10:19,199 Peter Deans: You almost can't have one weak link in amongst all 175 00:10:19,200 --> 00:10:23,130 Peter Deans: of that because if you've got all the right incentives 176 00:10:23,130 --> 00:10:25,978 Peter Deans: and the right frameworks and reporting, but the culture's not 177 00:10:25,980 --> 00:10:30,359 Peter Deans: right, middle, lower down, or even at the top, it's very hard 178 00:10:30,359 --> 00:10:33,929 Peter Deans: to make it all work. I think boards, and I know we've 179 00:10:33,929 --> 00:10:35,820 Peter Deans: talked about this on the program before, I mean the 180 00:10:35,820 --> 00:10:41,940 Peter Deans: boards are on notice, particularly publicly listed entities that shareholders 181 00:10:41,940 --> 00:10:45,119 Peter Deans: and regulators and the community hold them to account when 182 00:10:45,120 --> 00:10:48,570 Peter Deans: things go wrong. So I think the downside risk, and 183 00:10:48,570 --> 00:10:52,559 Peter Deans: I actually quite like to talk about losses avoided and 184 00:10:52,559 --> 00:10:56,849 Peter Deans: also licensed operators, social licensed operators, two of the very strong 185 00:10:56,849 --> 00:10:59,670 Peter Deans: and compelling reasons to spend a little bit of time 186 00:10:59,670 --> 00:11:03,750 Peter Deans: and money getting this right. To get the right level 187 00:11:03,750 --> 00:11:07,140 Peter Deans: of risk resources, to get the right managers in across 188 00:11:07,140 --> 00:11:10,588 Peter Deans: the whole business because you can spend a few million 189 00:11:10,590 --> 00:11:12,630 Peter Deans: dollars and it'll save you hundreds of millions of dollars 190 00:11:12,630 --> 00:11:16,679 Peter Deans: in either regulatory fines, sanctions, legal fees, or in the 191 00:11:16,679 --> 00:11:21,990 Peter Deans: case of publicly listed companies, catastrophic drops in market capitalization, 192 00:11:22,469 --> 00:11:24,569 Peter Deans: which is I think is your lead in, it's where 193 00:11:24,570 --> 00:11:25,920 Peter Deans: we've seen with Star. 194 00:11:26,520 --> 00:11:28,230 Sean Aylmer: Peter, thank you for talking to Fear and Greed. 195 00:11:28,890 --> 00:11:30,300 Peter Deans: Always good to be here. Thanks, Sean. 196 00:11:30,720 --> 00:11:32,849 Sean Aylmer: That was Peter Deans, a former chief risk officer and 197 00:11:32,849 --> 00:11:37,380 Sean Aylmer: founder of Notwithoutrisk Consulting and independent expert advisor to the 198 00:11:37,380 --> 00:11:41,039 Sean Aylmer: Victorian and WA Royal Commissions into Crown Casino. This is 199 00:11:41,039 --> 00:11:43,230 Sean Aylmer: the Fear and Greed Business Interview. Join us every morning 200 00:11:43,230 --> 00:11:45,540 Sean Aylmer: for the full episode of Fear and Greed. Daily business 201 00:11:45,540 --> 00:11:47,790 Sean Aylmer: news for people who make their own decisions. I'm Sean 202 00:11:47,790 --> 00:11:49,290 Sean Aylmer: Aylmer. Enjoy your day.