Conduct risk management information to play a key role in improving decision-making
1 May 2015
With conduct risk management a core focus for UK, EU and global regulators, regulatory experts at Deloitte, the business advisory firm, are emphasising the importance of management information (MI).
Clifford Smout, Partner in Deloitte’s Centre for Regulatory Strategy, said: “The regimes for Senior Managers in banking and insurance are likely to change the mind-set of senior individuals within firms. The FCA already expects conduct risk management to be embedded into firms’ risk management frameworks, and there will be a greater focus on individual accountability of senior managers if things go wrong.
“Strong conduct risk MI plays a fundamental role here. It arms individuals with the information they need to demonstrate they have taken reasonable steps to understand conduct risks and that appropriate controls have been implemented. Firms will need to review their MI to ensure that the right information is captured and escalated to senior management and governance committees.”
In Deloitte’s paper, Conduct Risk Management Information: Underpinning better decision-making, published today, 10 key principles have been identified to serve as a foundation for conduct risk MI across all financial services firm.
Smout commented: “There are a number of themes that emerge in our 10 key principles. Conduct risk MI needs to be outcomes-focused and forward-looking and should be linked to strategy, culture and risk management frameworks. Firms should use a suite of MI, analysed in different ways to identify trends; for example, looking at complaints over time for a product, or breaches or conflicts of interest policies across different parts of the business. Getting the frequency, accuracy and timeliness of MI right are important, as is the need for MI to be comprehensible and traceable. MI should support open communication and challenge within the firm, and, where relevant, be acted upon, with actions recorded.
“There is no one-size-fits-all approach to achieving strong conduct risk MI, but firms can use our principles as a guide. MI needs to cover operational technology, market propositions, conduct, behaviour, culture, and breaches of policies or regulation, so the key is to look broadly at a range of indicators. Firms will also need robust and clearly articulated governance, culture and capabilities. The important thing is that businesses are able to use the information to address conduct risk in advance of problems. Doing so allows firms to demonstrate that good client outcomes and market integrity are at the heart of their business.”
Notes to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
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