Conduct risk
Conduct is a lens into the culture of an organisation. By understanding and addressing the fundamental drivers of misconduct, Deloitte helps organisations drive a sustainable and robust risk culture to protect themselves for future growth.
Conduct failings seem to be widespread across several jurisdictions, many of which have been recently bought to light as regulators step up their activities to address such occurrences.
In New Zealand, there is a unique opportunity to take control of the conduct agenda by proactively addressing the drivers of a positive risk culture and conduct through an organisation’s operations and overall governance processes.
The recent conduct and culture reviews by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ) have further stressed the significance of a proactive and organisation-wide approach to managing conduct risk. Banks and life insurers are now required to report on plans to address the regulator’s feedback; with deadlines of end of March 2019 for banks and 30 June 2019 for insurers.
Embracing this approach drives the prevention of misconduct and the achievement of fair customer outcomes – both of which are influential in building an organisation’s reputation in the market and generating trust amongst customers.
A summary of the findings and the implications for the financial industry can be found below.
Key themes from the FMA and RBNZ review findings
- Ownership rests with you – conduct risk is your organisation’s responsibility; you can obtain assistance to manage risk however ultimately ownership ends with you.
- Accountability is organisation-wide – everyone is accountable and has a role to play in managing conduct risk; from boards to front line employees and advisers.
- Good culture is essential – a well-entrenched positive risk culture is fundamental to ensuring good customer outcomes.
- Demonstrate your proactive approach – you must be able to demonstrate how you are focused on good customer outcomes with your processes, culture, systems, practices and overall business strategy to ensure ongoing product suitability.
Understanding the implications of the findings
Responses from banks and life insurers to regulators should factor in the following aspects:
How Deloitte can help
Our team can support you and your organisation in your conduct and risk culture journey through:
- Performing risk assessments throughout your operations, covering people, channel, product and customers, to identify potential ‘hot spots’ and immediate focus areas.
- Working with Boards and senior management to help them understand the key conduct issues and risks.
- Assisting with culture assessments to understand where strengths and focus areas lie.
- Enhancing existing governance and monitoring processes to protect you against conduct risks.
- Development of a project plan and road map to understand and mitigate your conduct risk.Supporting your engagement with the regulators.
Further information
Conduct and building a positive risk culture
In this five-part article series, our experts, in association with Newsroom, investigate key issues organisations need to address around conduct, the fair treatment of customers and how to build a positive risk culture.
Read the article series here.
Aloysius Teh
