Governance and conduct - 5 measures of effective conduct

Video | December 2018 | 05:28

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Governance and conduct - 5 measures of effective conduct
Christian Blackwell Hello, and welcome to the continuation of our series on governance and conduct. I'm here today with Tunde Fasoyiro in our Regulatory Compliance Consulting practice to talk about five ways that firms can actually measure effective conduct.

Tunde, maybe you could start with something that firms could do in the front line in the business to measure effective conduct.

Tunde Fasoyiro Thank you Christian.   One of the tools that I believe would be an effective way of measuring firm's conduct is the front line business taking a proactive step to identify risks that might emanate from their business.  Now, when they take this proactive step, so for instance if we look at firms reviewing, we take onboarding, KYC onboarding, so the onboarding of new clients into a business, if the firm takes a proactive review to establish whether the information or whether there are any gaps in the information, we found that to be a lot more effective than having to wait for the second line, i.e. compliance, or the third line, or audit, to take that step of carrying out the review because what we have noticed is that when that happens, the second line may have to carry out that remediation exercise again.
Christian Blackwell So it's more like the self-identification of issues rather than waiting for a kind of second line or third line function.
Tunde Fasoyiro So we've found self-identification of those issues a lot more effective in that they are taking a proactive step to ensure that the information in the onboarding process is pretty much up to date rather than being told that you have issues in your procedures, in the documentation and having to update that.
Christian Blackwell What about the control environment more generally? Is there any way we can use that as an indicator for effective conduct?
Tunde Fasoyiro Yes, so if we are looking at the control environment, what would be an effective tool in respect of conduct would be a shift from detective to preventative. The firm is not just waiting to detect any issues or any risks, what they are doing is to again take that proactive step to prevent it in the first place and that provides for efficiencies within the business.
Christian Blackwell Another area where we can get a lot of rich data is around complaints. Is there any way that we can use that as a measure?
Tunde Fasoyiro Yes, complaints is known to be a very effective tool in addressing conduct, in looking at conduct, in looking at behaviour. So, for instance if you carry out a root cause analysis, where a complaint has been lodged, or a series of complaints have been lodged or you are looking at your complaints over a period of say three to six months, for every quarter, it has been known to be very effective when a root cause analysis has been carried out on the different types of complaints.  You can also compare that to what happens in other businesses as well and look at how they deal with such issues so that in a way prepares the business in terms of that conduct, in terms of that behaviour and that can be cascaded across the business generally and improves culture.
Christian Blackwell That's interesting from the perspective of the firm. What about dealing with the clients is there anything that we can take from those interactions.
Tunde Fasoyiro Yes, so one effective measure I would say would be client surveys. Now the client surveys could be on a client name basis or it could be anonymous and what we've observed is that that does generate a lot of feedback from clients on the business' behaviour.
Christian Blackwell So we've got data from our clients externally, what about internally, say in the performance management process, is there anything we can take from that in terms of effective conduct?
Tunde Fasoyiro Yes, so we look at performance management process again, one good tool is a 360, that's a 360 degrees feedback and what that does really is it allows staff to be assessed by their peers, by stakeholders within the business and basically what has been assessed as conduct and behaviour, and that kind of feeds into performance, into remuneration, into promotion. Now, if you think about it, we're not just talking about 360 feedback for one person, we're talking about 360 feedback on multiple staff and when you aggregate that, that kind of gives you sort of a trend in relation to conduct and behaviour of staff within the business.
Christian Blackwell Thank you that's really good, five very interesting ways of measuring effective conduct.