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Firms asked to speak up about their risk conduct frameworks

05/10/18

In September the FCA requested detailed information from a small number of firms – particularly sell-side brokers, on their conduct risk frameworks. This was sparked by the regulator’s concerns around whether firms have fully implemented appropriate conduct risk frameworks – and if they even have frameworks in place.

Speaking to Thomson Reuters, TCC Senior Regulatory Consultant Lorraine Mouat discussed the regulator’s concerns and stressed the importance of forming an actionable approach to risk conduct.

“Firms need to define what conduct risk means for their business and then consider how best to address this risk. If firms don’t know what conduct risk their business faces then how can they even begin to measure and monitor how they are doing against expectations?”

Brokers and insurers are amongst the sectors still resistant to cultural change and some firms lack integration of conduct risk management into their wider risk management frameworks.

“It’s one thing to have a framework in place but this needs to be supported by appropriate management information as a means of monitoring risk, otherwise the business won’t be as aware as it should be or could be.” Lorraine said

“It’s something that should be ingrained in a firms’ culture. It needs to be linked to strategy and firms need to consider conduct risk throughout all business processes, including their recruitment and induction.”

With the introduction of the conduct risk framework requirement in 2014, the Fair and effective Markets Review in 2015 and the 2017 Industry Codes of Conduct consultation paper, the FCA continues to focus on firms’ approach to effective conduct risk management.

Actions such as reaching out directly to firms to demonstrate their compliance are likely to continue, making it paramount that firms are prepared. At TCC we can help – find out more about our Conduct Risk Framework and Controls solutions here and get in touch with us today.

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