Employee conduct is a priority in many industries, especially in regulated businesses. Making sure you know what conduct risks are is key to running an effective compliance programme. We have listed 5 steps that you must consider in order to enhance the compliance of your business and avoid misconduct.
1. Have a clear and unique company statement and culture
When a company has a clear statement and a solid set of values, it is easier to avoid misconduct because subcultures will not emerge. A badly stabilised company culture reflects the employee behaviour and lack of trust from outsiders, such as customers. Trust is crucial in many industries, especially in the financial industry. Losing it can harm the reputation of the company and chaos arises.
Kevin Stiroh, executive vice-president of The New York Federal Reserve Bank, indicates why the company culture is so important in the industry:
“Root cause analyses of many recent cases of misconduct in the financial sector suggest that misconduct is not just the product of a few individuals or bad processes, but rather the result of wider organizational breakdowns, enabled by the firm’s culture”.
2. Give leaders and individuals within the organisation responsibility for their misconduct
Derville Rowland, Director General Financial Conduct of the Central Bank of Ireland states, “Accountability is key to managing conduct risk, the FSB identified lack of accountability for misconduct as a key cultural driver of misconduct and recommended that national authorities identify and assign key responsibilities, hold individuals accountable and assess the suitability of individuals assigned key responsibilities”.
It is crucial that employees are responsible for their conduct in the company. The rules must be clear, and leaders must emphasize which kind of conduct is acceptable and not acceptable in accordance with the guidelines of the company. Creating a framework of responsibilities is key to assessing these issues and determining responsibilities and duties within the company.
3. Incentivise ethical behaviour across the whole organisation and at all levels
Leadership is definitely something to be cognizant of when managing conduct risks. The high level of organisation displayed should be an example to all and establish a culture of compliance. It is paramount that the leaders in the company have a clear code of what is acceptable and unacceptable. Parameters must be set for all levels and departments. With regard to ethical behaviour, Julie Wood, CEO of Guidepost Solutions, recommends, “…companies should look to reinforce ethical norms and reward employees who set a positive example”.
4. Make manuals, procedures and processes easy to follow and to understand
If your organisation has complicated manuals, procedures and processes, the chance of employees making mistakes are more likely. If manuals are very difficult to follow, it may allow employees the opportunity to avoid controls, which in turn may lead to misconduct.
Thomas C. Barker, Executive Vice President and General Counsel of the Federal Reserve Bank of New York, argues that “rules can be difficult and tedious … we comply … only because it represents a mandatory but silly rule … and not because the sanction seeks to address a problem that all should find abhorrent”.
5. Have an adequate monitoring system that is easy to implement and use
It is crucial to recognise that liability and autonomy are important in employees´ satisfaction and productivity. However, to monitor and control for poor conduct is crucial for compliance and mandatory for some regulatory regimes. The system used to monitor and control compliance must be adequate, in order to give management the ability to identify risks.
While all the steps mentioned above are important, if your company does not have a modern way to monitor compliance and conduct, you are leaving yourself liable to misconduct and unprofessional behaviour.
If you want to know more about conduct risk, compliance and how technology can help you to manage risks, download our whitepaper today.
Listen to our webinar "Investigating Misconduct and Its Root Causes" to learn even more.