itsual Conduct Risk
Overview
Conduct risk focuses on how the firm’s behavior affects customer and market outcomes. It sits at the intersection of culture, incentives, product design, and compliance.
When to Use
- Product and sales practice reviews
- Incentive scheme assessments
- Culture and conduct risk assessments
- Remediation after conduct failures
Core Practices
- Map where customer harm could occur in the value chain
- Review incentives for unintended pressure
- Monitor leading indicators (complaints, cancelations, outlier sales)
- Embed conduct considerations in product approval
- Escalate systemic conduct issues to senior governance
- Align remediation with root causes, not only individual blame
Principles
- Bad outcomes can follow “technically allowed” behavior
- Culture and incentives often explain conduct better than policy gaps alone
- Detect patterns early through MI, not only after scandals
- Senior accountability is part of the control environment
Verification
- Conduct risk scenarios are identified for key products
- Incentive reviews occur on a defined cadence
- MI and complaints feed conduct governance