Yabber Global

Conduct Risk – How Yabber Can Help

This is the first in a series of communications where we will try to help regulated companies mitigate risk by using our support services.

The threat of financial loss to an organisation caused by the poor judgment of employees and/or their managers has always been a battle for companies that provide products or advice in the financial services sector.  Post the GFC in 2007, conduct risk gained more attention in the sector after it was revealed that unethical behaviour was a primary cause.   In Australia, regulatory compliance bodies, including ASIC, consider corporate culture as a factor when reviewing potential enforcement actions.  The evaluation criteria for conduct risk, including that of culture, largely focusses on;

•    How a company’s employees interact with their customers
•    The company’s process for monitoring those interactions
•    How a company addresses regulatory requirements
•    How decisions are made
•    How a company tracks its progress and performance
after changes to its policies

Whilst the process for managing conduct risk will differ between companies, in general a successful step-by-step conduct risk management approach is needed.  We have helped build and monitor processes and measurements for companies, including one of the main drivers of misconduct – human interaction.

Simply put, misconduct occurs when someone in the company at some point decides to do the wrong thing for their customers, often because they were incentivised to do so and put personal or shareholder interests ahead of those of customers.  Of course, sometimes that may be inadvertent because of inadequacies in a company’s practices, frameworks, training or even inadequate supervision.

The risk that behaviours of individuals, or the company itself, can seriously affect customer outcomes has recently been highlighted in the Royal Commission report.  Three specific examples that were raised are culture, conflicts of interest and sales incentives. All are classed as sources of conduct risk.  Clearly many companies have a significant amount of remedial work to do following the publishing of the report, but these specific aspects need review urgently.

To find out how Yabber can help you with conduct risk reviews, customer interactions and measuring outcomes, please call or email us for an initial chat.

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