Posts Tagged ‘Change’

Speaker interview: Nikhil Aggarwal

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Nikhil Aggarwal is Data & Analytics Executive, FinTech Entrepreneur in Residence at iValley Innovation Center

Given all the hype, where has RegTech fallen short over the past year, and where has it exceeded expectations?

Increasingly complex regulations coupled with heightened scrutiny from regulators has resulted in more banks and financial institutions building out broad spectrum RegTech programs. This has resulted in financial institutions applying RegTech solutions to use cases including i) enhanced regulatory reporting, ii) robust biometric and digital identity management, and iii) streamlining of KYC, CDD and anti-money laundering efforts. As a result, banks and financial institutions will be better placed to address a range of national and international regulations, including PSD2, AMLD4, DFS 504 and MiFID II.
Adoption and implementation efforts have not always been consistent due to evolving compliance requirements. In addition, RegTech efforts continue to focus on hygiene factors, such as building out data lakes and reporting routines, but we have yet to apply advanced analytics, machine learning and artificial intelligence techniques beyond initial experimentation.

Which areas of regulatory compliance will we see revolutionized by RegTech in the near-term, and which areas still pose the biggest challenges for RegTech?

RegTech is radically changing the mitigation of money laundering and other financial crime risks. Banks have leveraged RegTech data management solutions to significantly improve their KYC and KYT processes. As a result, client due diligence efforts during on-boarding and periodic risk reviews are more comprehensive. Banks are now making proactive decisions to deepen existing client relationships and de-risk and exit identified clients. Robotic Process Automation is also being applied to mechanical ETL data processes so investigators can focus on higher value-add sub-processes.
The core challenge in RegTech (from the solutions providers’ perspective) is to bridge the gap between risk management/business leadership and technologists. Often times, the value proposition and sales cycle focus on a predefined technology product which may not capture a broader set of evolving risk nuances. As a result, a proposed solution may check the technology boxes, but will not address all the underlying regulatory, compliance and operational risks.

To what extent is RegTech benefitting both financial services firms and consumers (through lower costs, improved products and services, etc.), and what is the scope for this to develop?

RegTech solutions are increasingly focusing on both the operational and risk identification dimensions. Increased efficiency has resulted in reduced noise in the form of “lower false positives,” and sharpened risk identification and coverage in form of “higher true positives.” This allows financial institutions to optimally allocate their resources for an improved PNL, and to pass savings on to clients with a better customer experience.
From a development perspective, there is an opportunity to build both governance and
change management modules and embed these into RegTech solutions. Audit trails, traceability, sign-offs/attestations, and governance are core thematic areas during a regulatory examination.

How can large firms most effectively respond to, and engage with, the growing band of RegTech providers?

Collaboration between large firms, RegTech providers and regulators will result in significant mutual benefits. Large firms must share contextual knowledge (i.e., their risk footprint, customer segments, product set) and their interpretation of regulations with RegTech providers. Similarly, providers must explain their solutions and answer the fundamental questions on how core risk issues are being addressed. This dialogue needs to reach a granular level where data elements and the technology stack are reviewed and thoroughly understood. There is a need to enhance flexibility in solution design to allow new regulations to be factored in during rollout of subsequent release cycles.

What do RegTech providers need to do to improve their offerings in the coming year?

RegTech providers must ensure that their offerings are holistic, and must specify which risk typologies and taxonomies are being addressed, ensure that data flow and metrics and reporting modules are robust, and utilize more sophisticated analytics approaches to address underlying risk and operational issues. Hiring domain experts to complement their strong technologist benches will also enable RegTech providers to develop meaningful and relevant solutions.
Incremental innovation and experimental developments in emerging areas such as Blockchain and
Natural Language Programming will also further develop providers’ minimum viable product and value proposition. Effective scalable solutions must be rolled out at the same time as well.

Why will you be speaking at Finance Edge’s RegTech Summit US, and what do you hope to get out of the event?

I look forward to engaging with like-minded industry peers, and discussing how we can collaborateand work together to move the industry forward.
The Finance Edge Team has designed a comprehensive Summit agenda, and assembled a speaker
panel comprising leading industry practitioners and RegTech vendors. This will definitely lead to
meaningful conversations for all participants!

Speaker interview: John Byrne

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John Byrne, CEO at Corlytics

A year or so after ‘RegTech’ became a buzz word in financial services, what are the key enablers and barriers to its adoption?

Although RegTech has only just become a buzz word, financial institutions are long used to using regulatory technology. The difference with the current buzz around RegTech is the opportunities that regulated firms and regulators perceive RegTech to bring.
The key enablers to RegTech are the myriad of problems that organisations face with overwhelming regulatory complexity and uneven, overlapping regulatory timeframes. Regulated firms need help with making the complex simple. Also, the gap between regulatory intent of regulators and interpretation of these regulations provides an opportunity for providers to bridge the gap.
The key barriers to adoption of RegTech are multi-fold. Firstly, there is a lot of noise in the market which makes the buying process for regulated firms difficult. Many RegTech vendors, even though they have a good idea, do not properly understand the problems faced by regulated firms. Long sales cycles and procurement processes mean that RegTech firms needs to be focussed and funded or risk going out of business before their technology is adopted.

How should RegTech providers, FIs and regulators be working together to create holistic solutions? How can collaboration programs work, in practice.

RegTech providers, FIs and regulators should be working together to make regulatory intent – the actual regulations – clear, understandable and implementable, so that they are properly interpreted.
At Corlytics, we use our multi-layered regulatory taxonomy in the major global regulators to create intelligent handbooks that are fully taxonomised. We also extract intelligence from regulatory enforcements, enabling financial institutions to understand at a regulatory category, product/service line, regulator, jurisdiction and control level why enforcements are levied on a global basis.
This means that we can accurately map regulatory intent from handbooks right through to interpretation failings so that FIs can address these failings.
This collaborative process means that we can work on better regulatory outcomes for everyone.
The MiFID II / MiFIR implementing legislative acts require a significant number of actors – located within as well as outside of the EU – to obtain an LEI that are under no such obligation to date.

Which regulations are stopping innovative products and services from being brought to market? How can RegTech help firms to overcome this?

I don’t look at regulations as being a barrier to innovation. Quite the opposite, I believe that regulations are put in place to try to protect consumers, customers, the financial services system and ultimately global economies. To this end, RegTech firms can help organisations to drive down the ever-escalating cost of regulatory compliance – we know it’s on the increase year on year. Not only that, by accurately measuring regulatory risk, RegTech firms like Corlytics can help organisations to impact the bottom line by moving regulatory and legal provisions from the balance sheet back into the business to be invested in core products and services.
RegTech can provide a competitive advantage to FIs who properly embrace the capabilities it brings.

Which key regulatory compliance challenges would you most like to see being tackled by RegTech providers?

The biggest challenges that I would like to see RegTech providers help solve are as follows:
  • Measuring Regulatory Risk using a data driven approach. Current approaches to measuring regulatory risk do not provide the same rigour as monitoring market risk or credit risk. FIs need help with using a data driven approach to properly understanding their exposure
  • Enable FIs to more easily understand regulatory obligations across the
  • Provide a mechanism for collaboration between regulators and financial institutions.

What are the most important characteristics you look for in a new RegTech solution?

A new RegTech solution must tackle a real problem that exists within a financial institution, that is either impossible or difficult to solve. Ideally, a RegTech vendor should validate the solution with someone who has experienced the pain of regulatory compliance (e.g. a Chief Compliance Officer etc).
It must provide an immediate impact to the customer, preferably in terms of ROI. It must be simple to use, loved by its customers and be capable of being used immediately after purchase (not waiting 2 years for a roadmap to deliver).
As with all solutions, there must be a set of customers that are willing to pay for the new RegTech solution.

Why will you be speaking at ECN’s RegTech Summit US, and what do you hope to get out of the event

There are a lot of RegTech vendors in the market. There are a lot of RegTech events to attend.
ECN’s RegTech Summit US has a reputation for delivering quality insights – providing regulators, FIs and RegTech vendors with an ability to cut through the noise in the market. I am honoured to be part of that conversation.
From this event, I hope to connect with and hear from like-minded individuals and organisations who see the value that RegTech can bring to Financial Services industry.

Speaker interview: Sarah Clark

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Mitek Systems

Sarah Clark, General Manager, Mitek Systems.

A year or so after ‘RegTech’ became a buzz word in financial services, what are the key enablers and barriers to its adoption?


The biggest barrier we normally run into is the fact that many of the regulations are not prescriptive in terms of the solutions that are considered adequate. This lack of definition oftentimes results into a generalized hesitancy to do something new until it’s known more broadly to be accepted by regulators. But it is imperative for FIs to be on the leading edge if they want to reap the benefit of topline growth. The key takeaway is that initial tests from top banks have happened, they have succeeded, and as a business, they are expanding and using our solutions for that expansion. Willing to take risks and go with more efficient, superior solutions, more quickly, is a huge differentiator for financial institutions, especially when it comes to adding value by optimizing customer acquisition and onboarding.


Additionally, financial services providers normally perceive budget as one of the main barriers to RegTech adoption. The reality is that, if you look at the astronomical investment that financial institutions need to make to be in compliance, utilizing RegTech solutions should result into net efficiencies instead of added costs. In other words, despite being perceived as a barrier, investing in RegTech solutions actually generates a positive outcome.


How should RegTech providers, FIs and regulators be working together to create holistic solutions? How can collaboration programs work, in practice?


At Mitek we firmly believe that collaboration is the cornerstone of success. RegTech should ultimately be leveraged to reduce compliance costs for financial firms while allowing regulators to better ensure compliance and successfully achieve their policy goals. The rapid pace at which regulation change and extend their scope presents an important source of struggles for regulatory bodies, as it keeps getting more difficult for them to keep up with their mandates. Fostering collaboration will not only be beneficial for both RegTech providers and financial institutions, but also for regulators, as open communication and collaboration should be utilized to assess and improve current little contextualized and articulated regulations, which come with huge effort and cost and that hardly help achieve the desired outcomes.


We are also starting to see a willingness to consume more cloud services in order to accelerate innovation through smarter data sharing. There is a growing number of our customers willing to share more data with us so we can help them better achieve their goals. Collaboration is paramount to accelerate innovation and service consumers more efficiently. Take Mitek as an example; we’re specialists in handling PII and identity documents and our customers know that, trusting us with this piece of the puzzle so they can focus on their key business and strategic priorities. We are starting to notice a change of trend towards a greater trust between FIs and RegTech providers; a shift of paradigm from customers-vendors to partners.  Creating this type of relationship accelerates innovation and boosts FIs’ ability to serve their customers more efficiently.


Which regulations are stopping innovative products and services from being brought to market? How can RegTech help firms to overcome this?


I see regulations as catalysts rather than deterrents for innovation. Regulations encourage institutions and their RegTech providers to find ways to ensure compliance is met, but also to deliver better user experiences, more automation, and more accurate and better outcomes for consumers. Regulations present both challenges and opportunities. Take the latest European Anti-Money Laundering Directive (AMLD4) for example, which increases the required frequency and scope of essential Know Your Customer (KYC) checks performed by banks and other financial institutions, resulting in further inflated operational costs.


On the other hand, the amended AMLD4 suggests using government-backed eID schemes, such as GOV.UK Verify, to improve KYC processes. Nevertheless, as most eID schemes are not expected to be ready for some time, this same piece of regulation recommends advanced mobile technology to bridge the gap. And there is where RegTech can move the needle for financial institutions. Financial services providers that partner with RegTech firms to replace inefficient, manual, prone-to-error status quo KYC checks, with cost-efficient, advanced automated solutions such as digital identity verification, can save about £47 million a year while meeting today consumer’s demands for speed, security and convenience.


Which key regulatory compliance challenges would you most like to see being tackled by RegTech providers?


We have reached a tipping point where it’s no longer feasible for banks to keep up with this increasing volume of regulations through manual, very inefficient, and very expensive processes which don’t meet expectations for seamless user journeys. The rise of RegTech is definitely related to the rapid growth of new regulations. The flipping side is that regulatory technology such as ID document verification has really become mature. At Mitek we specialize in leveraging the latest biometrics, deep learning, and AI to solve for identity verification in the digital channel, satisfying that increasing demand to comply with ever-stringent regulations at scale through user friendly, secure cloud platforms and APIs.


Good news is that some important steps have been already taken. In Europe, the upcoming PSD2 will drive more opportunities for collaboration, as its laser-focused at improving the quality of service provided by payments companies and financial institutions by means of more, closer, and more extensive collaboration among regulators, traditional institutions, industry disruptors and technology providers.


What are the most important characteristics you look for in a new RegTech solution?


Based on our experience with top global financial organizations, it is important to engage with a RegTech provider that is proven and has already been successful. For example, we’re live with one of the top 3 banks in the UK, as well as with the leading banks in The Netherlands. In our experience, banks and other financial services providers tend to start by applying RegTech solutions such as Mitek’s to a given product or account type, normally through one of their subsidiaries. Once they are live, have tested the new technology and seen the first results, then they would extend that technology to other product ranges. Financial institutions need partners they can trust; they need RegTech vendors that are willing to keep a steady stream of engagement with their team, that offers a robust Customer Success program.


Why will you be speaking at ECN’s RegTech Summit Europe, and what do you hope to get out of the event?


The financial services industry is going through a very interesting period of time, defined by  exciting technology innovations and new regulatory trends. At a time where RegTech is reaching a tipping point, the agenda of RegTech Summit US goes deep into some of the most compelling trends such as the need of further collaboration between financial institutions and RegTech vendors or the growing demand for more defined regulations that provide prescriptive guidance about adequate and sufficient regulatory technology solutions. solutions regulation solutions vendors. Personally, I’m looking forward to having the opportunity to discuss current challenges and opportunities with peers and to spend time with some of our top customers, learning how we can continue to expand our product offerings to further meet their needs.”

Speaker interview: Stephan Wolf

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Stephan Wolf, CEO of the Global Legal Entity Identifier Foundation (GLEIF).

What obligations relevant to the Legal Entity Identifier (LEI) are triggered by the forthcoming MiFID II / MiFIR?

Market participants that must comply with the forthcoming European Union (EU) revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) should obtain an LEI as soon as possible. Failure to obtain an LEI (by the firm or its client) in time will prevent firms from being able to comply with the reporting requirements applicable in the EU as of 3 January 2018.
With regard to transaction reporting under MiFIR, the European Securities and Markets Authority (ESMA) has clarified that investment firms should obtain LEIs from their clients before providing services which would trigger reporting obligations in respect of transactions carried out on behalf of those clients.
ESMA has also confirmed to GLEIF that compliance with MiFIR requires investment firms to maintain its own LEI duly renewed. This means that the reference data, i.e. the publicly available information on legal entities identifiable with an LEI, is re-validated annually by the managing LEI issuer against a third-party source. An investment firm should therefore ensure that its LEI is renewed by the date stated with its LEI record.

How can market participants globally, who trade in the EU, ensure they meet compliance requirements related to LEI established with MiFID II / MiFIR?

The MiFID II / MiFIR implementing legislative acts require a significant number of actors – located within as well as outside of the EU – to obtain an LEI that are under no such obligation to date.
To further streamline the issuance of LEIs, GLEIF has introduced the concept of the ‘Registration Agent’, which allows organisations to help their clients to access the network of LEI issuing organisations. The Registration Agent’s role in the Global LEI System is directly connected to the LEI issuing organisation. LEI issuers – also referenced as Local Operating Units – supply registration, renewal and other services, and act as the primary interface for legal entities wishing to obtain an LEI. The Registration Agent may choose to partner with one or more LEI issuing organisations to ensure its clients’ needs for LEI services are met. The LEI issuers are standing ready to assist legal entities to obtain an LEI as well as to collaborate with firms interested in acting as a Registration Agent.

How can accessing the LEI data pool aid and simplify regulatory reporting?

Following the financial crisis, the goal of the drivers of the LEI initiative – the Group of 20, the Financial Stability Board and many regulators around the world – was to use the LEI to create transparency in the derivatives markets.
As demonstrated with the current LEI population, these efforts have generated excellent results. At the end of June 2017, some 520,000 LEIs were assigned to legal entities active, primarily, in the derivatives markets. Most of these entities are based in the US and EU where regulations require the use of LEIs to uniquely identify counterparties to transactions in regulatory reporting. Public authorities in these jurisdictions rely on the LEI to evaluate risk, take corrective steps and, if required, minimise market abuse and improve the accuracy of financial data.

Do you see benefits arising from having an LEI beyond complying with regulatory reporting requirements?

Yes. We invite market participants to think beyond compliance and consider the business case for obtaining an LEI. Organisations across the globe not only need to keep on the right side of the regulators, but also need to be able to make smarter, less costly and more reliable decisions about who to do business with.
The trouble is that up until now, legal entity reference data has been proprietary, siloed and non-standardised. The good news is, there is a solution and progress towards unlocking it is already well under-way. It exists in the form of the Global LEI Index. This is the only online source, made available by GLEIF, that provides open, standardised and high quality entity reference data with the potential to capture any entity engaging in financial transactions globally.
Once fully deployed by market participants, using the LEI data pool will empower organisations across the board to simplify and accelerate operations and gain deeper insight into the global market place. If your counterparts – corporate customers, providers and other business partners – could all be uniquely, easily and speedily identified with the LEI, that would provide you with cost benefits and new business opportunities. Accessing and using the LEI data pool could support a multitude of applications in, for example, risk management, compliance and client relationship management.
The benefits generated for the wider business community by the Global LEI Index grow in line with the rate of LEI adoption.
So, our message to businesses around the globe is this: Get an LEI and make it work for you.

Why will you be speaking at ECN’s RegTech Summit Europe, and what do you hope to get out of the event?

I very much look forward to meeting and speaking with industry representatives spearheading initiatives designed to ensure regulatory compliance based on innovative applications that will ultimately help creating more transparent markets.

Speaker interview: Eavan Garvey

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Eavan Garvey, Head of Group Conduct Risk, Bank of Ireland.

How is the work to improve conduct and culture impacting financial services firms?

Reduced cost from conduct risk that has crystallised. The cost of conduct issues is significant; while the actual amount of remediation and the enforcement penalties are likely to account for the bulk of costs, other costs such as staff, printing, postage, buildings, etc can also be considerable.

Customer retention. Where a firm has values that place the customer at the core, and where these values can be seen in everything the firm does from the development of new products, to how the products are advertised and the managing of complaints, thus demonstrating that the firm has the customer truly at its heart, the customer is more likely to have an increased confidence in the firm and is more likely to stay with the firm and avail of additional products or services provided by the firm.

Positive reputational impact. Where the firm’s strategy is clear and where it can easily be seen how it fully aligns with the firm’s approach to customer outcomes. In addition to customers being more likely to stay, the firm has an improved relationship with third parties including regulators, policy makers, media, etc increases market confidence.

Simplified product proposition. A truly customer centric firm will support a product proposition that is less complex, easier to understand, with terms that are not designed to create cumbersome conditions that are difficult to understand. Such a firm will also have systems that are likely to support the proper maintenance and servicing of products, and will instill confidence in the market as any likelihood of remediation is reduced or removed.

Less complaints/errors. A firm is likely to have a reduced volume of complaints where conduct risk has been fully embedded. Similarly, where a firm is fully focused on embedding good conduct outcomes, the number of complaints being escalated to the ombudsman are likely to be reduced as the complaint outcome will be fully focused on what is in the best interest for the customer. Consequently, reputational risk will be reduced.

Staff are more likely to be engaged as products are simpler to understand, easier to explain to customers, processes are less complicated and driven primarily by systems rather than manual intervention. Customers are happier with the product proposition and service, and are less likely to complain.

Sustainable long term solutions. The firm’s strategy is more sustainable as it is focused on embedding long term sustainable solutions. Regulators are keen to understand that a firm’s strategic plans are fully aligned to customer values, thus ensuring that the strategy is more sustainable.


What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

In addition to consumer protection, conduct risk can be described as a focus on the corporate culture and the ethical behaviour of employees and management in a firm. To successfully embed an ethical culture across a firm, conduct risk culture must first be supported and implemented by senior management and board members. Regulators have regularly linked the competence and ability of staff to some of the well-known remediation issues. Regulators are looking to firms to evidence the link between appropriate culture, adequate training and managing the risks that a firm’s particular business model represents.

Training is a critically important element of the conduct risk framework. If staff do not understand what or how to embed good customer outcomes, in addition to why it is important to maintain the integrity of the market, behaviours will never change. With this in mind, and as training is particularly important, it is critical that this is right from the outset. Training should consider how to develop staff behaviours in addition to providing technical knowledge in relation to the various components of the conduct risk framework, in particular the conduct risk policies.

What are the keys to delivering high quality products and services, and a great user experience, while maintaining a robust conduct agenda?

“Provider firms will be expected to have robust procedures to assess their target market, perform adequate stress testing, and manage the product risks for consumers. We would expect the sorts of standards that consumers associate with basic vehicle safety or over‑the-counter medicines, for example, to be the norm for widely sold financial products. Firms should also consider making their own pre‑approval processes more transparent; the aim should be to increase the level of trust consumers have in financial products.” Martin Wheatley – Journey to the FCA

When developing products firms should consider:

  • whether the product can meet customer needs
  • whether there are any unfair terms
  • whether documentation detailing the product is clear and easy to understand
  • whether the product is overly complex
  • who should be the target market
  • marketing and advertisements must describe the product or service in a clear, fair and not misleading way, to help the customer avoid poor purchase decisions


How is the ever-increasing level of digitisation impacting conduct risk management?

Regulators encourage innovation in the best interests of consumers. In particular, technology and product innovation can enhance competition and customer choice. There is however a need to focus on fair consumer outcomes, for example when considering provision of financial advice through on-line channels. Where firms are moving more to providing financial advice and recommendations through on-line channels they must ensure that the necessary protections are in place to deliver the right consumer outcomes. Firms must consider the following:

  • The appropriateness of selling all products online and whether certain more complex products should only be sold with an advisor.
  • How customers including more vulnerable customers are not financially excluded where the overall strategy is to move towards online platforms.
  • Consumers tend to focus on headline information when buying online, firms must ensure key information in relation to the features and risks is available and displayed in a manner easily identifiable and understood to all customers. Regulators refer to the ‘Framing’ effect which describes how different consumer choices can be made depending on how information is set out. Firms can present the same information in different ways and this can lead to different choices by consumers. For example, certain pieces of information may be more prominent on a web site then others resulting in certain biases being prompted. Firms can benefit from ‘framing’ where they have deliberately created complicated pricing structures, where key information is masked by including some irrelevant information or where the information can induce an emotional response.
  • Whether robust systems are in place to deliver a reliable service to customers. While technology does and will continue in the future to form a part of many firms’ growth and development strategies, firms will become more vulnerable due to dependencies on underlying systems, and the substantive operational risk this can cause. An over reliance on technology-based infrastructures can create additional risks from systems used outside financial markets such as mobile phone providers.


What are the most powerful ways that firms can improve their conduct agendas (getting buy-in from staff / improving systems and processes / developing better risk models, etc.)?

To improve the conduct agenda, it is critically important that firms get buy in from the board and staff. The firms board and senior management can be comfortable that the conduct risk strategy is robust and sustainable and that there are benefits to the firm:

  • from a business sense – it makes good business as the business model becomes sustainable with little customer complaints reduced cost as a result of less crystallised conduct risk, this is obviously a benefit to the firm as well as its shareholders;
  • from a moral and ethical sense – that firms do things because they should, not simply because they can.

Why will you be speaking at ECN’s Conduct Risk Summit, and what do you hope to get out of the event?

This is an area that I am hugely passionate about. I really believe that when firms are truly customer centric they will reap rewards not only in the context of customer satisfaction, but also in the behaviours and values espoused by staff and senior management across the firm. I believe this message and the meaning of conduct risk has been overly complicated over the last number of years, and I would like to show this is not such a complex risk, and that measures can be easily implemented to reduce the crystallisation of conduct risk issues.

Speaker interview: Imtiaz Hussain

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Imtiaz Hussain, Head of Audit UK, Ireland, BNY Mellon.

How is the work to improve conduct and culture impacting financial services firms?

Doing what’s right has always been the expectation for financial institutions. The recent financial crisis reminded us that not all of us were doing right by our customers and other stakeholders, and poor conduct in financial services was blamed. The renewed focus on culture and conduct now means firms have to embed conduct risk in their existing risk management framework. Firms that seek to extract value out of conduct risk management are defining conduct risk strategy, establishing conduct risk appetite and developing appropriate metrics to ensure that conduct agenda is considered throughout the customer lifecycle. Equally, the board and senior management are becoming more vocal on the conduct topic and setting the tone for right conduct, culture and behaviour. In the UK, the Senior Managers Regime further heightened the urgency to ensure conduct risk management permeates throughout financial services institutions.

What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

Setting the tone from the top is key, as employees can look up to set of values and behaviours expected from top management. Also, a safe environment for people to speak up and voice concerns, and even rewarding such behaviours, encourage proactive management of conduct risk. All employees should be encouraged to embrace and demonstrate the concept of good customer outcome. One way to make this concept go viral in an organisation is story telling. It is through story telling that employees can contextualise what good and bad look like.

What are the keys to delivering high quality products and services, and a great user experience, while maintaining a robust conduct agenda?

Delivering better client experience and conduct risk management complement each other. As I mentioned previously, the key to delighting customers and giving them better experiences is to put the customer at the centre of what firms do. From product development to marketing and selling, and then servicing clients, employees should be able to identify conduct risk in the value chain and mitigate any risks associated with conduct.

How is the ever-increasing level of digitisation impacting conduct risk management?

Digitisation is driving change in the financial services business model, but it is also changing customer behavior and transforming customer experience. Digitisation certainly has an impact on a firm’s conduct risk profile and it is vital for organisations to manage the risks associated with this impact. This is precisely the reason why a firm should strive to establish a robust and resilient conduct risk management framework that is understood and bought in by staff at all levels.

What are the most powerful ways that firms can improve their conduct agendas?

For me, the two most powerful catalysts for improving the conduct risk agenda are first story telling (so people at all levels understand and live and breathe the conduct agenda), and second empowering them with tools and methods for better management of conduct risk. These include training staff regularly on conduct, establishing a robust conduct risk management framework, and encouraging conduct risk dialogue by incorporating the conduct agenda into existing policies and procedures, etc. It is important to recognise that, whilst setting tone at the top is vital, tone in the middle and tone at the bottom is absolutely critical for bringing the conduct agenda to life. Embedding conduct risk management will require everybody in the firm.

Speaker interview: Heidi Mosbek

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Heidi Mosbek, Head of Group Business & Technical Audit, Generali

How is the work to improve conduct and culture impacting financial services firms?

As in any strategic decision, there is an upfront investment to develop and embed a strong, mature and prudent conduct or compliance culture in a business. If we think about improving risk and compliance culture in a business that used to view risks as something owned and managed in the Risk, Compliance or Audit Functions, a change in that view and operation will be perceived as challenging. Employees and management will be expected to establish a stronger control environment in the business lines, and take effective measures to mitigate identified risks to the business, working closely with the control functions. The control functions also need to improve their understanding of the business and learn to speak the same language – or to translate “risk phases” to explain what can go wrong, or how this issue can harm the business or customers.

What are the best ways to encourage staff to engage with the conduct agenda in their day-to-day activities?

A clear tone at the top needs to clearly express “why” we want our staff to change and “what” the expectations are of leaders’ and employees’ behaviours and achievements. It is key that the benefits are explained, e.g. that improving conduct and the effective management of risks is not solely to meet the requirements of the control functions, but that it is a tool to make the business strong and sound, to the benefit of customers and shareholders.

What are the most powerful ways that firms can improve their conduct?

It is important to involve the people who actually work in the specific areas that need to be improved. A pure top down approach with limited possibility to have a say and impact on changes in processes and routines can potentially lead to disengagement and less effective actions. Involve day-to-day operations, and empower people to identify gaps, suggest simple solutions and take actions.

Why will you be speaking at ECN’s Conduct Risk Summit, and what do you hope to get out of the event?

I look forward to meeting a lot of people, who will each bring a different background and experience; and to discussing and sharing views on topics relevant to a day to day operation.

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