17 Mar 2020
Conduct is fundamentally about how people behave. We’re mostly conditioned from a young age to recognise and demonstrate appropriate behaviour, whether individually or as part of a group.
We sometimes suppress these fundamental lessons learned, especially when we’re in a pattern or routine of doing things a certain way. But these lessons and expectations are always there. We need to be attuned to them and have the confidence to challenge others’ behaviour and to question existing and poor practices.
"There’s been a shift for individuals at all levels of the financial services industry to be responsible and accountable for their own conduct.”
This is important because poor conduct is not always intentional. It can, for example, stem from inadvertent practices such as not taking care when disposing of confidential material or taking shortcuts through set procedures.
A robust conduct risk framework should be embedded in the fabric of all financial institutions. It should proactively promote a culture of good behaviour, ethics and constructive challenge. And have no tolerance for poor conduct. The framework should reinforce these expectations for all dealings, including internally, with clients (retail or wholesale) and with counterparties or peers.
Individual responsibility and accountability
In the past, responsibility and oversight for conduct was often considered the domain of compliance teams. More recently, there’s been a shift for individuals at all levels of the financial services industry to be responsible and accountable for their own conduct and, in the case of managers, accountable for the conduct of their teams. Greater individual accountability is becoming the ‘new normal’ and the nearly 2,000 signatories to the Banking and Finance Oath is testament to this.
The carrot and stick are effective at addressing some good and poor conduct. For example, individual performance outcomes and remuneration - job promotion, bonuses, salary advancement - may either be granted or withheld based on conduct. Penalties or termination of employment and the use of real-life case studies to illustrate unacceptable conduct are becoming more common.
But sometimes we need to rely on our intuition and our conscience to assess what’s good or poor behaviour, drawing on general standards of fairness, trust and honesty. This is especially important, for example, when balancing your own interests against those of the customer.
Conduct and alternative working arrangements
Individual responsibility and accountability are even more important in what may become another ‘new normal’ - large numbers of staff working from home.
These working environments, with reduced or altered supervision and monitoring, create more opportunities for misconduct, including the misuse of confidential information, fraud and theft. They can make surveillance more challenging, given the inability to physically see staff and monitor for non-verbal cues that are often key to identifying risks. They also create more opportunities for poor practices, such as leaving computers and confidential material unsecured and talking about sensitive matters in earshot of others in the home.
The financial institutions best placed to manage these challenges have a robust conduct risk framework that is embedded in the practices of staff at all levels and a culture of accountability.
I call on each of you to critically reflect on your remote working arrangements during the COVID-19 pandemic, to ensure that you haven’t inadvertently created an environment that is susceptible to poor conduct – either by yourself or those around you. The whole is only as good as the sum of its parts.
Calissa Aldridge is Senior Executive Leader for Market Supervision at ASIC
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
17 Mar 2020
29 May 2020