The views and opinions expressed in this article are those of the thought leader and not those of CeFPro.
By Mark Chaplin, Chief Risk Officer, Aviva
Why is it so important for institutions to develop and promote risk culture agendas and align conduct?
In a principles based regulatory environment like the UK, financial services firms need to establish a strong culture which encourages staff to do the right thing for customers, staff and shareholders. Our staff make decisions every day, from a contact centre operator explaining how a product operates to a MD managing trade-offs between different customers and investors we need a culture that supports good decision making.
Our Conduct Framework at Aviva has culture as a key driver of conduct. We know that if we provide a safe environment for staff to ask questions this will help us to balance risk and deliver good conduct outcomes for all our stakeholders. At the same time we know that a good culture helps us to attract and retain the best talent.
How can an effective risk culture influence conduct agenda?
As mentioned above, culture is a key driver of conduct in Aviva’s Conduct Framework. We know that a good culture helps our staff to feel safe or to have psychological safety – this promotes innovative thinking, encourages open challenge, supports staff asking questions and considers opposing views. Together this helps us make the best possible decisions for the customer while at the same time managing conduct risk.
What are the current regulatory standards and what are the challenges involved in compliance of those standards?
Arguably the most important regulatory standard for conduct is the FCA Code of Conduct (COCON) and the best way to think about conduct is through the FCA Five Conduct Rules rather than starting with all the detailed rules and guidance.
The five rules speak to the culture we want to see in financial services. But it’s hard to ensure compliance. How do you measure compliance with the requirement to act with integrity? For us this is about being open to challenge, being honest with ourselves, our customers, regulators, shareholders. It’s about encouraging diversity, which itself encourages diversity of thought. This list sounds a lot like the one above, which is why culture is so important to ensuring good conduct outcomes.
At the same time we shouldn’t lose sight of how hard this is. Credit risk is easier because you can measure it directly. Integrity is, almost by definition, doing the right thing when you know no one can see you – the only way to achieve this is with a good culture.
Why is it important to link good governance and culture to a sustainable business model?
In long-term insurance, customers are typically paying premiums for many years before they may make a claim or withdraw their savings. This requires a high level of trust in your firm to be there when your customers need you and to treat your customers fairly in all your dealings with them. Without this trust the business is not sustainable and without good governance and a positive culture it will be impossible to build and sustain trust.
Where do you see the future of culture and conduct in light of increased remote working?
As I touched on before, integrity is about doing the right thing when you know no one is watching. At a very risk based level, a good culture is part of the mitigant to the increased risks of home working and becomes ever more important.
At a more macro, maybe optimistic level, our culture will keep our staff engaged. I think home working will increase employee’s interest in an organisation’s culture especially if they are considering moving roles.
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