Conduct risk is a form of business risk that refers to potential misconduct of individuals associated with a firm, including senior executives, staffers, vendors, customers, agents and other third-parties affiliated with the firm. Conduct risk poses an existential threat to companies across industries and jurisdictions.
Today's post debunks six common myths about conduct risk.
Myth 1: Conduct Risk is a compliance issue.
Compliance professionals have the expertise to develop policies and codes of conduct. But Compliance must also have support from the executive management team. Technology can help to close gaps in the program.
Myth 2: Bribery and Corruption risk is the same as Conduct risk.
Anti-Bribery and Corruption is a common conduct risk scenario. Other common conduct risk violations include insider trading violations and conflicts from outside business activities and third parties.
Myth 3: Conduct Risk is only a concern for organizations operating in the US.
Regulators around the world have been investing resources to combat conduct risk, most commonly around anti-bribery and corruption. In the UK, the Senior Managers and Certification Regime (SMCR) was created to hold more individuals accountable for their conduct.
Myth 4: A culture of compliance is enough to mitigate risk.
Without the ability to centrally manage conduct risk data, even firms that pride themselves on promoting cultures of compliance can overlook misconduct that could have been curtailed.
Myth 5: High turnover means a higher risk of misconduct.
Not necessarily. When data and systems are configured, the supervisory and compliance teams can easily view and share conduct risk insight even as compliance professionals come and go over time.
Myth 6: Only very large firms use technology to manage conduct risk.
A growing number of firms leverage regtech to eliminate conduct risk blind spots. Centralizing and cross-referencing conduct risk data enables firms to empower their people and processes with intuitive tools to manage conduct risk more easily, effectively and cost-efficiently.
For more read on Conduct Risk challenges, common scenarios and how regtech can help, download the free Whitepaper, What is Conduct Risk and How Can Technology Mitigate it?