What is conduct risk?
Conduct risk is a catch-all concept. It includes anything a firm might engage in that could cause problems to consumer protection, market integrity or competition. It’s how a firm’s strategy deals with risks and conflicts of interest. Essentially, it covers the risk of staff acting inappropriately, unprofessionally, unethically or even engaging in illegal practices. It also defines how individuals and organisations conduct themselves. Consequently, it covers the policies and procedures that are in place to support good conduct and minimise risks and issues. So it is all about ethical work practices and building the right awareness culture.
Why should you take conduct risk seriously?
After the financial crisis it became clear that financial organisations need to improve how they conduct their business, and to tighten their procedures to ensure the PPI mis-selling scandal doesn’t happen again. As a result, regulators across the world are cracking down on inappropriate conduct and have handed out some massive fines. And individuals have faced fines, prosecution and even losing their jobs as a result of conduct issues.With increased scrutiny on the Financial sector comes higher regulation, which can increase the cost of compliance training for large firms. Regulators are encouraging firms to work to establish their own framework for conduct risk, and adopt a ‘top-down’ approach where governance is led from the boardroom to the floor. Because the publicity surround misconduct has been high, firms are understandably protective of their reputation. Firms embroiled in a conduct risk issue have had to spend more resources on fire-fighting, leaving less time to focus on the business itself.
Creating the right culture
It’s no longer enough to send staff on generic box-ticking training sessions to cover compliance issues. Firms must ensure that their staff have a greater understanding of their responsibilities to minimise conduct risk. This can only be achieved by creating a conduct risk awareness culture which filters all the way from the boardroom to the ‘shop floor’. The first step is putting in place a solid governance structure to manage conduct risk. All employees must understand the firm’s values and their responsibility in minimising risk. And the correct procedures need to be in place to allow colleagues to challenge conduct and question decisions that have been made. Once this becomes part of the normal cycle of work, your firm will have a solid culture for your conduct risk values.
Introducing Conduct Risk Training
It’s important that firms make sure they manage conduct risk and create the right culture within their organisation. Training plays a vital part in building this culture. Regulators will want to see evidence that you have provided your teams with information and awareness. More firms are introducing conduct risk training as part of their processes. And the great thing is that this training is really making a difference, rather than serving as a mere box-checking exercise. Elearning is a great tool for reaching everyone in your organisation. It ensures that training is available for existing staff and new hires onboarding into the company; consequently firms are turning to elearning for conduct risk training. By using elearning, the training is more consistent and serves as a constant resource for staff and contractors. A bespoke elearning solution can illustrate the risks with specific examples and scenarios relevant to your business. These scenarios bring to life how conduct risk awareness must be part of everyday behaviour for everyone. Users can then explore how organisations manage risk and test their understanding.Bespoke elearning can play a vital part in your organisation’s conduct risk awareness. In fact, I would argue that a conduct risk elearning course must be bespoke. You need to address what the risks are in your business and how you manage them. The FCA think so too. They state that ‘a firm’s conduct risk profile will be unique to it’.
How can we help?
We have developed bespoke conduct risk courses for many clients in the Financial sector. An approach we love to use is to encourage learners to select what they think conduct risk is at the beginning of the course. Based on their answers, we use personalised learning to show them case studies and scenarios to understand the nuances of conduct risk. Our content authors and developers have delved deep into the minefield of conduct risk and have worked with many SMEs to turn training into brilliant elearning. So not only do we bring elearning expertise, but we also have a great deal of conduct risk knowledge to boot! If you would like to use bespoke elearning to deliver conduct risk training in your organisation, or you want to chat to me about other approaches, do feel free to email me at firstname.lastname@example.org