Conduct risk continues to be a huge area of focus across regulated industries, particularly financial services, following a catalogue of high profile customer failures in recent years. With trust in financial services remaining low, it is recognised that addressing organisational culture is critical to delivery of a truly customer-centric approach, to improve customers’ experiences and strengthen overall risk management practices.
Establishing and embedding a culture in which employees are doing the 'right' thing at the 'right' time, regardless of circumstance, is key to an organisation's ability to conduct itself in a manner that is commensurate with its regulatory obligations, the expectations of its stakeholders and customers and its corporate vision and values. Understanding, measuring and changing culture can be complex and challenging however, with the financial services industry yet to identify or adopt a unified approach for doing so.

In our experience most cultural measurement or change efforts tend to be either too abstract or too rules-based. Abstract in that they espouse or seek to understand behaviours aligned to broad values; or rules-based in that they seek to promote or assess compliance against a set of pre-defined behavioural standards.

This is rarely reflective of the real world, as employee behaviour tends to be much more context-specific. Whilst most employees will genuinely seek to put the customer at the heart of all their decisions, they may think twice when faced with a conflicting priority of missing a monthly target the following day.

What we have found to be much more effective is to base cultural measurement or change efforts around real-world business scenarios.
Scenarios work because they take employees away from the black and white world of rules and into the grey areas of ethical choices and nuanced debate. It gives them a deeper and more individually relevant sense of what behaviours are or are not acceptable within the company’s values. And that drives greater consistency of behaviour across the organisation as a whole.

Measuring conduct and culture
The key starting point is to establish a baseline measurement to understand current cultural characteristics and ascertain how these factors can influence employees’ behaviour. But what it is the most effective way to do this?

As well as supporting active debate with employees, we’ve found the use of scenarios is incredibly effective when it comes to baselining culture and measuring changes over time. Presenting employees with scenarios outlining a dilemma in a real-life workplace situation and asking how they would respond helps to unearth what the culture looks like ‘on the ground’ and identifies circumstances that generate higher levels of conduct risk.

In short, measuring and observing how employees’ day-to-day behaviours are determined by the real-world situations that they face on a daily basis and understanding what is influencing those behaviours will form the building blocks of a culture which is right for your people, your customers and your bottom line.