Researching Conduct and its related risks, I?m encouraged at how much progress has been made by regulated firms since the application of the Senior Managers and Certification Regime (SMCR) - and underlying conduct rules - first by banks and then by insurers. In a third wave, the regime is now being extended to asset managers and other firms.

So welcome to 2020 and the knowledge that whatever your type of financial business, you?re now included in the new regulatory landscape of conduct reporting. With the SMCR extending across the entire UK financial sector this year, don't be surprised to find your friendly local conduct regulatory case officer asking to interview your front-office staff at their desks, asking them how aware they are of the new ?rules of behaviour?. 

I?m often asked by newcomers to the conduct regime: ?Is it really possible to get your firm conduct-ready first time??  It is - however, while it's partly about making straightforward practical compliance preparations, the real challenge is to start a deeper conversation across the firm, about real ?conduct aware? working. There is a subtle but important change of attitude that firms need to consider, to show they?re properly conduct aware and risk-culture positive.

Alongside the extension of conduct rules into new sub-sectors, our industry as a whole has been going through another type of conduct journey - moving on from steps that remediated past bad behaviour incidents (PPI, LIBOR manipulation, various mis-selling), towards improved preventative measures (setting up better-designed rewards and control processes, and clearer personal accountability). I have the great pleasure of moderating, within the UK Finance Conduct and Culture Academy, the brightest and best conduct and culture leaders from the first wave of regulated firms. These firms are now progressing to the third stage of that journey: looking at how best to assemble the right reporting information, the so-called ?new MI?.

Across all financial markets, regulated firms now ask about managing conduct risk as a top priority alongside financial risk. All the more so since misconduct is now indictable not only around how all your staff behave in relation to financial contracts (mis-selling, conflicts of interest, etc), but also any non-financial forms of misconduct (antisocial behaviour, harassment, etc). To perform their roles effectively, managers are now expected to show how they give due thought to risk culture and corporate purpose, drawing on an informed understanding of human behaviour. 

The good news is that managing your conduct and culture exposure is not just about preparing for the downside as the regulators take a tougher line. It's more important and more positive to remember that everyone across the sector - including the regulators - is now recognising the business benefit of firms providing the best possible levels of service. After some initial adjustment pains, many firms are now looking to the conduct regime as an opportunity to show competitive advantage, to prove how good their work ethic really is. If the SMCR is only just being rolled out to your firm, and/or you have not yet fully reflected on it as a competitive opportunity, our Conduct and Culture Focus workshop series provides the practical knowledge and simple steps you need.

If your firm is looking to improve or create a robust control framework for conduct-aware decisions, join us at the UK Finance Conduct Risk: Right First Time workshop, part of the UK Finance Conduct and Culture Focus series. We will not only help to reduce uncertainty but start to improve conduct-aware behaviour across your firm.  As you discover and build on the strong business case for working this way, conduct will no longer be a net compliance cost, but instead a source of profit: Happy New Year, indeed.

To learn more about the Conduct and Culture Focus series we?re running a free webinar on 15 January to answer your questions.

You can also visit our website to learn more about the five Conduct and Culture Focus series workshops.