Conflict Risk Management in Banks

Monique Melis, Managing Director and Service Line Head, Regulatory Consulting at Duff & Phelps comments:

“There is a worrying disconnect in the industry today between blindly following volumes and volumes of internal policies and having an actual understanding of what they mean operationally to the business. This is particularly evident when it comes to conduct risk and managing conflicts of interest. As such, regulators are still battling with how to effectively tackle the issue as although the right procedures may be in place, firms are still struggling with ethics and conduct risk.  

“Much more training is required, and at all levels. Regular staff engagement that emphasises adherence to the cultural and ethical aspects of the business is important. That said, it is also clear that many in the industry feel like they are walking across a regulatory tightrope. There is a risk we could drive senior employees out of the financial services sector if these measures are too punitive. In fact, we have already seen evidence of that across various key functions in both large and mid-sized banks.”

Paul Cook, CEO at human capital consultancy Alderbrooke, comments:

“When trying to improve organisational culture, rules and regulations are only part of the answer. This is because when divorced from behaviours that drive culture within an organisation, increased or overbearing rules or regulations do not provide the mechanism that stops wrongdoing. They are far from a silver bullet and unable to reveal anything of significance about the culture of the bank, including whether employees feel able to speak up, for instance.

“The findings from this survey are certainly concerning but it is important to remember that whilst culture is discussed and agreed at board level, it is ultimately the responsibility of those managers much further down the chain to instil this culture within their staff, empowering them to act responsibly and speak out against those who aren’t.”