Conduct & Culture

Ariane Chapelle, Jimi Hinchliffe and Mark Laycock

Conduct management and corporate culture are closely intertwined. Both require a holistic approach; they both relate to every component of an operational risk management framework and are most effectively managed as integrated features of the framework rather than a stand-alone risk type. The Institute of Operational Risk is preparing its long-awaited Sound Practice Guidance on Conduct.

CONDUCT FAILURES AND THE CREATION OF THE FCA

The creation of the Financial Conduct Authority (FCA) on 1 April 2013 elevated conduct to the front page of financial newspapers and the board agenda of every bank. The creation of the FCA followed a series of scandals, including mis-selling of PPI and interest rate swaps, and in the wholesale markets, the manipulation of benchmarks such as LIBOR. The analysis of the Global Financial Crisis (GFC) shed light on misconduct and supervisory failures by senior managers and regulators alike.

Conduct issues are not new. Indeed ‘conduct of business’ has been an important part of the regulatory lexicon in the UK for decades, typically managed by compliance functions. The focus was on complying with regulatory rules on dealing with customers, including client

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