Posts Tagged ‘Risk’

Interview: Nick Rugg

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Nick Rugg, Senior Underwriter,Financial Institutions and Fintech, Markel International.

Whilst Open Banking will bring opportunities, what risks do you think could arise?

Transactions involving the sharing of data and the movement of funds will always carry risk. Where there are multiple parties involved in these transactions there is clearly heightened risk. The exposure to fraud, theft and data loss for banks, account information service providers and payment initiation service providers will no doubt be a key concern for these companies.

What can companies within the Open Banking space do to protect themselves against these risks?

As well as having strong customer authentication and data protection procedures it is vital that companies also have the right insurance policy in place. The right insurance policy is key for companies that wish to gain FCA authorisation to offer account information services and payment initiation services and to protect themselves against the liabilities that may arise from offering these services.

Is there adequate insurance cover available to companies that are looking to offer account information or payment initiation services?

The market for the type of insurance that AISPs and PISPs need in order to gain FCA authorisation is very small, however the Markel fintech insurance policy has the covers required for these companies to become authorised and we are very proud to say that our insurance policy has formed part of many companies successful applications for authorisation from the FCA.

What can AISPs and PISPs do to ensure that they have the right insurance cover in place when applying to the FCA for authorisation?

The right insurance policy is critical for FCA authorisation so it’s important that companies wishing to offer account information and payment initiation services speak to an experienced insurance broker or insurer of fintech companies in order to arrange the right level and breadth of cover required for successful authorisation.

What do you hope to get out of the Finance Edge’s Open Banking Summit?

It will be a great opportunity to meet some interesting people within the Open Banking sphere and to hear about their ideas and experiences. And hopefully they will be interested to hear what I have to say too!

Webinar: Digitising Customer Onboarding

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REGISTER FOR FREE – CLICK HERE

27 February 2018
12:00 pm GMT or after on demand
60 mins

Improve the customer experience without compromising on compliance and risk

Today’s consumers, accustomed to receiving smart and convenient digital services from companies such as Uber, Apple and Amazon, and are beginning to demand personalised, interactive and immediate services from their banks.
A recent report revealed 42% of UK consumers have adopted FinTech services (EY 2017 FinTech Adoption Survey), so it’s no surprise banks want to adapt to the fast-moving digital marketplace where new and disruptive competitors are already circling. What’s stopping them though, is risk.
Creating an environment that drives the productivity, speed and compliance essential to sell financial services via digital channels is paramount to survival.
This webinar will explore how banks can digitise the customer onboarding process without compromising on risk, satisfying customers, regulators and shareholders alike.
And all this before even looking at the wider business issues. What are the best opportunities for banks and fintechs to collaborate – and to compete? How will customers – who in the UK, at least, seem largely ignorant or sceptical about the promise of open banking – react? Will one or more of tech big five make a decisive move into the sector?

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Speaker Interview: Andrea Brancatelli

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Andrea Brancatelli, MoneyGram International, Senior Legal Counsel

What are the 3 biggest challenges for in-house teams in FS firms today?

The first challenge is an increase in regulations, which in certain areas seem to overlap and under certain circumstances are difficult to apply, due to conflicts with pre-existing legislation or lack of local (secondary) legislation.
The second challenge is political instability (just to recall Brexit, the Turkish coup d’etat and now the Cataluña crisis), which impacts business models and legal structures used by corporations.
Finally, increased difficulty in correctly legally-classifying new legal structures, which arise from the use of new technologies, especially when such legal structures are used in various jurisdictions.

What key steps can legal teams take, to create a higher value proposition for the business and for customers?

Work closer with business teams and customers in order to better understand their needs and therefore propose tailored legal solutions which, on one hand, work case by case for the specific situation, and on the other hand, may be used – with minimum changes – also to regulate future different scenarios.
Translate in practical effective terms – and in advance – the effects of new upcoming legislation and simplify regulatory fulfilments for business and for clients, also through the use of new technologies (e.g. apply e-signatures or simplified binding means where possible).

What hurdles do legal teams face, in terms of implementing and delivering value from new technology solutions? How can these be overcome?

A main hurdle is the lack of laws/regulations/practice with respect to new technologies that the market is implementing, but the regulators have not yet legally classified (e.g. blockchain). Such a hurdle may be overcome by adopting known classifications and standard law principles, and in case of doubt carrying out formal inquiries to the authorities, in order to open a discussion and eventually obtain a sandbox.

How do you view the current level of interaction / collaboration between in-house teams across the FS industry, and how could this develop in the future?

Market associations are often an occasion to interact / collaborate on common legal topics, however, it could be useful to develop more interaction also with the authorities. This could be achieved by increasing the number of consultations and/or roundtables on new laws or modifications to current laws, especially on legal aspects of fintech where there is still great uncertainty

Which pain points for in-house teams most lend themselves to automation, and which pain points will be the most difficult for technology to fix?

Contract drafting (especially for standard agreements), data storage (for corporate secretary) and regulatory fulfilments (for timing of filing with authorities) may surely benefit from automation. It will be more difficult to substitute legal advice or negotiations, where technology may only serve as a support to lawyers driving in person.

Why will you be speaking at Finance Edge’s Next Generation In-House Summit, and what do you hope to get out of the event?

I believe that at all topics related to new technologies in the financial and legal sector require maximum attention and maximum support by all stakeholders, since what we are discussing today will be what we will use and work with for the coming years. As e-signature seemed a revolution only few years ago and now is customary in most business, today we are asked to shape the main legal features of new game changers that will have an important role for the future. I look forward to learning about new approaches that may be eventually be used also within the money transfer business.

Speaker interview: Dean Nash

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Dean Nash, Head of Legal & Compliance, Monzo Bank

What are the 3 biggest challenges for in-house teams in FS firms today?

From my perspective it is first the speed of technological change in financial services; this means legal teams needing to know how the technology works, speak the language of their stakeholders (increasingly more likely to be a software developer than a business manager) and operate their way by redefining their engagement to work with agile development teams. This can be a real challenge for legal teams, but when it is done well can be hugely powerful.
Second is the rate of regulatory change in financial services. The regulators have been very active in all areas, from consumer protection to facilitating innovation and market stability. These create far reaching and complicated pieces of regulation that have massive impacts on virtually every financial services firm. The legal team need to scope, interpret, raise resource for, and oversee implementation of these huge projects – at a time when the legal foundation for many of these pieces of regulation is under question by Brexit.
Third is demonstrating value. Every other part of the business is automating as many processes as possible, and with so much regulation and legislation available at the touch of a button, the challenge of demonstrating value can be a real challenge. I think lawyers have a critical and unique role to play in business success, but demonstrating that beyond a vague concept of ‘trusted advisor’ is a real challenge.

What key steps can legal teams take, to create a higher value proposition for the business and for customers?

The key is to look to colleagues around the rest of the organisation and adopt the best practices being utilised across the organisation. I woke very closely with our risk team to ensure that legal risk is managed in a smart and risk-based way. I view legal risk in quite a simple way as coming down to two things: 1. The risk that we can’t enforce our rights as we would like to, or 2. We have breached a law and will be punished one way or another. Lawyers need to really understand – genuinely – what is your company’s risk appetite for these things? Are there other solutions to these risks aside from legal solutions? What are the processes and controls we need in place to manage these risks? How can you ensure these processes work with the business objectives and not against them?

What hurdles do legal teams face, in terms of implementing and delivering value from new technology solutions? How can these be overcome?

To answer this I think you need a really honest appraisal of the technology solutions you currently use and the value you add with that technology. What technology solution improvement would bring the largest value-add to the business for the least disruption? How does the cost / benefit analysis of this stack up against other ‘value-add’ initiatives such as stratifying or functionalising legal services? The simplest and biggest value-add I’ve experienced has come from investment in better communication, collaboration and management tools: basically, better hardware and software.

How do you view the current level of interaction / collaboration between in-house teams across the FS industry, and how could this develop in the future?

I think the industry is doing a great job of collaborating across some of the unique issues that we face as ‘fintechs’. Whether that is as a learning environment to understand early stage fundraising mechanics, or to share concerns about regulatory changes that may increase barriers to entry into financial services. The community is setting our sights around some of the pain points that we all feel, and seeing if we can (disruptively) propose collaborative solutions to common problems. First up – the dreaded NDA. We’d love to agree an industry standard and save everyone a lot of frustrating back and forth at the outset of an exciting business collaboration.

Which pain points for in-house teams most lend themselves to automation, and which pain points will be the most difficult for technology to fix?

I don’t think lawyers are best placed to answer that question to be honest. We are too likely to see the services we provide through the prism of our own training and biases. Legal teams will always have a critical role to play at a high level strategic level. For example, how upcoming regulation shapes business strategy, or which court to have a particular case heard in, or overall risk appetite given business. And doubtlessly lower, more repeatable tasks will be lost to either standardisation or automation. However, to make this happen, legal teams need to absorb developers and engineers into their teams and ask ‘what code could you write to replace the work I do?’

Why will you be speaking at Finance Edge’s Next Generation In-House Summit, and what do you hope to get out of the event?

As a bank that is less than two years old we have the luxury of being able to approach customer problems, business problems and indeed legal problems as an entirely greenfield project. This means digging back to first principles as to why we should design something in a particular way. For example, why should a lawyer review a contract before it is signed? Why should we protect our intellectual property? Why should we have terms and conditions for our products? Getting right back to the why and the first principles of these things has meant the way we approach our designs to these problems and the use of technology in those designs has been a fascinating process for me – and I would like to share this others. I am also keen to learn how other firms are approaching the question of technology in their organisations and see if there is any best practice I can take back to Monzo.

Speaker interview: Michael Harrats

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Michael Harrats, Senior Counsel, Legal & General Investment Management

What are the 3 biggest challenges for in-house teams in FS firms today?

A. Costs! Every non-revenue generating department is under cost pressure at the moment. Demonstrating value as a business partner is the cornerstone of the role of any in-house legal team.
B. Technology/disruption. These two go hand in hand and will be a major challenge for legal teams in FS firms for some time to come. They offer exciting opportunities, but their challenges shouldn’t be underestimated.
C. Brexit. Is always the elephant in the room. Adapting to the post Brexit environment will be the making or breaking of firms, and their legal teams will be key to assisting with Brexit compliant solutions under the new regime.

What key steps can legal teams take, to create a higher value proposition for the business and for customers?

In order to be effective at anything, you need to enjoy it and find it interesting. This certainly applies in the workplace. It might sound obvious, but lawyers need to be engaged and knowledgeable about their business and industry. Knowing the law is not nearly enough.
For me, this is all about taking the time and energy to learn about your business. What products do we sell? How are they perceived in the market? What do our competitors do better/worse than us? What are the key challenges and opportunities in our industry? Most of these won’t be legal related, but we still need to know about them in order to be effective partners to our businesses.
Once your team understand your business and your industry, their specialism (the law) can be applied to this effectively.

What hurdles do legal teams face, in terms of implementing and delivering value from new technology solutions? How can these be overcome?

Lack of knowledge within teams about technology solutions can cause a reluctance to engage with them. This is something we all need to guard against. I see no excuse for this. We are working in one of the most interesting times to be a lawyer. The scope of our roles and the range of tools we have to assist with them are changing at a rapid pace. It’s going to be challenging for us all, but we need to make sure we proactively own our technological development. I would like to see this formalised in the Law Society’s CPD rules, as it’s such a key aspect of our roles.
Pace of change is also a challenge. As soon as we get ourselves up to speed with a technological change, another one seems to appear (and I don’t just mean this year’s new smartphone). The key to mastering this is to take an active interest in technological developments. This won’t come easily to everyone but it’s something we need to work at.

How do you view the current level of interaction / collaboration between in-house teams across the FS industry, and how could this develop in the future?

We work well together. In the asset management industry a legal discussion group of in-house counsel across the main asset managers meets every couple of months to discuss legal, regulatory and market related issues we are all facing. I regularly attend and find the meetings useful. Earlier in the year, LGIM hosted one of these sessions and it was great to meet our peers and have an open discussion with them.
However, there is a danger that we can all become too specialised and only pay attention to our own segment of the market. We need to guard against this.

Which pain points for in-house teams most lend themselves to automation, and which pain points will be the most difficult for technology to fix?

In the short to medium term, I see automation as something which will be used to improve the accuracy of quite repetitive tasks which have previously been undertaken by paralegal/trainee/junior lawyers (e.g. data analysis, contract production and regulatory filings).
In the longer term, the sky really is the limit. I expect innovative solutions to develop which will transfer our way of working which will enable us to assist our businesses further. Some of the solutions we will use later in our careers have not been invented yet. That makes them difficult to anticipate, but offers exciting variation in our working lives.
However, I don’t think this means the ‘end of lawyers’ as often speculated in the press. Automation and AI will likely create increasingly capable solutions, but I’m sceptical whether we will see sentient (thinking) machines which render us surplus to requirements.

Why will you be speaking at Finance Edge’s Next Generation In-House Summit, and what do you hope to get out of the event?

We are operating in one of the most fluid times in the FS industry since the early 80’s. This presents us with many challenges, and it can be easy to become siloed in your own firm and miss the wood from the trees. I think it’s important to discuss ideas and approaches about the challenges our industry is facing with peers. This summit should prove a good opportunity to do so.

Speaker interview: Dr Solomon Osagie

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Dr Solomon Osagie, Chief Legal Counsel at TSYS International

What are the 3 biggest challenges for in-house teams in FS firms today?

In no particular order, I suspect that most General Counsel will consider that a constantly evolving regulatory environment poses a challenge. Whether one considers BAU or M&A activity, there are pressures to keep businesses compliant. For UK businesses, uncertainty about the regulatory impact of Brexit and how the process will evolve adds to the challenge. Many lawyers will also be mindful of financial pressures. Some of us have advocated over the years for legal teams to be more integrated into the business, but this brings with it the reality that legal teams have to operate under financial pressure and deliver services that are not necessarily revenue generating. One last challenge will be the implementation of the new data protection legislation, the GDPR.

What key steps can legal teams take to create a higher value proposition?

Early engagement with product teams, which helps lawyers to understand the value proposition better. It is unfortunate when transactional lawyers are unaware of the technical specifications of a solution, and they offer legal solutions which impede rather than facilitate the objectives. I have also suggested that lawyers consider taking on non-traditional roles like CSR to help push boundaries. They can demonstrate value in non-monetary ways. Thirdly, we should consider how to offer advice that is practical and innovative with an eye on the commercial objective.

What main hurdles do legal teams face, in terms of implementing and delivering value from new technology solutions? How can these be overcome?

Whilst new technology solutions can offer returns for a company, the risk exposure is greatly increased. This opportunity must be balanced against risks, and legal teams need to be forward in explaining this. Thereafter risk should be spread/mitigated where possible.
If the business is buying or creating new technology, the legal team will need to ensure the business has all the required rights to use the technology effectively. What IP rights are involved, does the business own them, who owns the output? Is the new technology owned under a license? Is the license broad enough to cover all activities that the business has in mind? We should also consider that there are adequate liability caps to reflect actual risk rather than contract value. Penalties for breaches of data protection law, for example, can far outweigh contract consideration.
Early engagement and a clear understanding of the business’ objectives is key. Understanding the product and the implications for any particular asset contained therein, e.g. data, IP etc., and how the product will be used by customers.

How do you view the current level of collaboration between in-house teams across the FS industry, and how could this develop in the future?

The FS industry is diverse, with many lawyers working in niche areas. There are some areas of commonality (such as implementation of new laws) but often the drivers and risks are different from business to business. The dominant position of the banks within the sector does mean that to an extent a bank’s approach to regulation and risk will flow down through supply chains. Collaboration via a cross-pollination of ideas around regulatory compliance, risk mitigation and alternative structuring would be helpful.

Which pain points for in-house teams most lend themselves to automation, and which pain points will be the most difficult for technology to fix?

Automation could help with standard agreements such as NDAs. The issue with automation comes in the more complex contracts – this may not be just because the deal is of a high value, but because of the commercial construct and the products involved, where automation would not pick up on the nuances of such deals. This is where skilled negotiators with expert knowledge of their industry and related products will save time and help all parties to reduce risk. Automation/machine learning is useful for calculating some elements of remedy – e.g. SLAs, possibly liability caps, change control procedures. Similarly it may be possible to cover off some standard form agreements and translations. However, negotiations are ultimately a human interaction, which require give and take on issues that will not follow predetermined patterns.

Why will you be speaking at Finance Edge’s Next Generation In-House Summit, and what do you hope to get out of the event?

The summit will be a great opportunity for members of in-house legal teams within the FS sector to come together and discuss current issues, and form ideas that can help our industry move forward during a very complex regulatory and political period.

Speaker interview: Victor Dorado

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Victor Dorado, Head of Legal, Santander

What are the 3 biggest challenges for in-house teams in FS firms today?

Although it is quite difficult to highlight only 3 challenges, I believe in-house teams have to work quite hard on: (i) providing proper legal support on the business transformation of financial entities, (ii) thinking globally when providing local legal advice, and (iii) looking for more efficient ways to work using available technology.

What key steps can legal teams take, to create a higher value proposition for the business and for customers?

In-house lawyers are a key element in creating business value, and as such, the most essential step we can take is to better understand the business’ needs. By opening up this communication, we can more effectively protect our companies from legal risks.

What hurdles do legal teams face, in terms of implementing and delivering value from new technology solutions? How can these be overcome?

The main hurdle to technology implementation is our own professional experience. We have learnt to carry out our jobs in a specific way: by reading manuals, laws, regulations, etc., all bound in paper. It should not be a major challenge to implement professionally what we have already changed in our personal life, i.e. using technology every day for reading newspapers, watching television, communicating on social media, and many other things. Technology solutions will only enhance the value provided by in-house lawyers, and will allow for greater efficiency by delivering better and more agile legal services.

How do you view the current level of interaction / collaboration between in-house teams across the FS industry, and how could this develop in the future?

In my experience, I see a productive level of interaction between in-house legal teams today, thanks to solutions already implemented. We are now doing things that, just few years ago, were absolutely impossible to do. There are many tools already in place effectively working for the FS industry, making it quite easy to interact and collaborate with other in-house teams.

Which pain points for in-house teams most lend themselves to automation, and which pain points will be the most difficult for technology to fix?

In my view, some tasks, such as taking minutes of a meeting or filing physical legal documentation, are pain points technology is already able to solve. Tasks requiring human understanding and engagement with facts are still too far advanced for technology to automate.

Why will you be speaking at Finance Edge’s Next Generation In-House Summit, and what do you hope to get out of the event?

I will be speaking at the summit because I believe we are living in a remarkable time for in-house lawyers – especially for those who work in the financial industry. No one knows where all these new solutions will take us, or how the industry will evolve in five years, but participating in such an interesting event like this one will allow me to exchange opinions and thoughts with other colleagues that have to face similar challenges.

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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“Very impressive agenda, speaker line up and audience. This event really did deliver 100% on its promises and it’s not often I can say that!”

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