Conduct Risk Framework


INSIGHT
Published
Dec 11th '23
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Developing a Conduct Risk Framework involves a cyclical and comprehensive process. Initially, it is critical to identify key conduct risks. This step involves thorough assessment and analysis of potential risks associated with the firm’s operations. Once these risks are identified, the next step is to develop a risk management strategy that aligns with the firm’s objectives and operational ethos.

 

Subsequently, firms should define risk appetite. This is essential to understand the level of risk the firm is willing to accept in pursuit of its objectives. The establishment of governance and accountability structures is crucial in ensuring that there is clarity and responsibility in managing conduct risks.

 

A vital aspect is to review and manage conflicts of interest, ensuring that potential internal and external conflicts are identified and appropriately managed. Optimizing systems and controls is about implementing robust systems to detect, monitor, and mitigate conduct risks effectively.

 

Fostering a positive organisational culture is key in embedding a risk-aware mindset throughout the organization. Finally, continuous monitoring and improvement ensures the framework remains effective and responsive to changing conditions, thus completing the cycle and leading back to the first step for ongoing refinement.

 

Sources
1. cognitiveview.com – Steps in Developing a Conduct Risk Framework (https://blog.cognitiveview.com/steps-in-developing-a-conduct-risk-framework)
2. linkedin.com – Steps in developing a Conduct Risk Framework (https://www.linkedin.com/pulse/steps-developing-conduct-risk-framework-dilip-mohapatra)
3. objectivus.com – Conduct Risk Framework – what the FCA expects (https://objectivus.com/conduct-risk-framework-what-the-fca-expects)
4. ifac.org – Eight Steps to Establish a Firm Risk Management Program (https://www.ifac.org/knowledge-gateway/preparing-future-ready-professionals/discussion/eight-steps-establish-firm-risk-management-program)
5. milliman.com – Global developments in conduct risk management (https://www.milliman.com/-/media/Milliman/importedfiles/uploadedFiles/insight/2017/global-developments-conduct-risk-management.ashx)
6. linklaters.com – Time to test your conduct risk management framework (https://www.linklaters.com/en/knowledge/publications/alerts-newsletters-and-guides/2021/august/08/time-to-test-your-conduct-risk-management-framework)

 

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