Background
Over the past decade banks and other financial services entities across the world were involved in various scandals relating to culture and reputational risk practices. Research has shown that since 2010, major international banks received conduct-related fines totalling more than £200 billion. Regulators globally are placing more emphasis on Conduct Risk Management.

Definition of Conduct
Conduct can be defined as the general behaviour expressed in actions, reactions, or inactions of an entity. (Business Dictionary)

Managing Conduct Risk – Globally
G20 countries and the Financial Stability Board among others, has made conduct risk a strategic priority for boards globally. This sets out to address customer and market conduct risk and strengthen boards and organizational culture.

In the United Kingdom (UK), the Financial Conduct Authority (FCA) is placing considerable emphasis on conduct risk. Their conduct risk legislation is largely principles based and is applicable to the majority of financial services entities.

Managing Conduct Risk— Locally
In South Africa, the Treating Customers Fairly (TCF) outcomes were introduced by the Financial Services Board (FSB). As per the FSB “TCF is an outcomes based regulatory and supervisory approach designed to ensure that specific, clearly articulated fairness outcomes for financial services consumers are delivered by regulated financial firms.”

Further to the TCF outcomes, a Market Conduct Framework is being developed in the Form of “Twin Peaks”. The “Twin Peaks” structure will be achieved by separating oversight of Market Conduct Regulation and Prudential Regulation.

Expectation on Financial Institutions
Regulators are expecting organisations to demonstrate that there is fairness in the customer value chain, mainly on product life cycle, product design and promotion, through advice and servicing, to complaints and claims handling.

Pillars of Conduct Risk

ETHICS

The ethical values applied to decision-making, conduct, and the relationship between the organisation, its stakeholders and the broader society.

CULTURE

The way in which members of an organisation relate to each other, their work, and the outside world in comparison to other organisations.

INTEGRITY

In the context of governance and ethics, integrity possesses the quality of being honest and having strong moral principles.

Has your firm started the following?

  • Defining the firms conduct landscape & determining how the customer value chain is impacted.
  • Understanding the firm’s capabilities to continuously meet the conduct expectations.
  • Integrating the firms conduct initiatives to Enterprise Risk Management (ERM).

Cutting Edge Solutions
Adept Advisory has proven to be a trusted advisor to provide a collaborative and cutting edge solution to the ever-changing regulatory requirements. Our team of regulatory experts can be of assistance.