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A Strategic Approach to Conduct Risk

Carole Switzer | June 3, 2014

As we all know, ill-advised risk tak­ing in the financial sector led the industry to the brink of collapse in recent years. Not only that, but sales schemes driven by inappropriate incen­tive plans and outlandish short-term ob­jectives caused many consumers to suffer severe financial consequences and lose trust in the entire financial marketplace. It seemed as though the customers, whether individual borrowers or institutional in­vestors, became mere pawns in a chess game played by bankers willing to sacri­fice them for a big win. Something was desperately wrong with conduct in the banks, and it needed to change.

Such was the genesis of the U.K.’s new Financial Conduct Authority (FCA) which was formed to address the protection of both customers and the fi­nancial markets as a whole. In a recent speech to the Association of Profes­sional Compliance Consultants, Clive Adamson, FCA director of supervision addressed the need for change to ad­dress conduct risk in this way:

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