Head of Compliance and Risk, Fund Services | CSC Global Financial Markets
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What defines conduct risk? Although there are few standardized responses, its definition becomes even more opaque during periods of uncertainty, such as the COVID outbreak we’re currently experiencing.
Corporate culture, and how it influences employee behavior, impacts conduct risk. Strong governance, guided by effective internal and external processes, mitigates risk. An organization’s operations, structure, leadership, image, employee-client relations, and community involvement have short- and long-term sustainability implications across all ESG factors.
Importance of good conduct
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffet
Buffet’s statement still holds true. Consider Bernie Madoff, Jordan Belfort, and Nick Leeson as examples of conduct risk gone awry.
Good conduct encourages additional positive conduct. The level of trust and belief in firms correlates to the level of conduct risk accepted and maintained within those firms. Consider the firms that are more desirable to work for, and those that are not. Now consider why. It could very likely be related to conduct issues around toxic work environments, poor controls and support, as well as regulatory and reputational concerns.
While trust and reputation are intangible assets, they remain strong markers of successful business metrics. They also form an integral part in attracting and retaining high-caliber management who drive positive and sustainable leadership goals and values.
COVID conduct concerns
Conduct risk escalates during periods of uncertainty, with the pandemic suddenly upending all aspects of corporate normalcy. Below are some of the major COVID conduct risk factors organisations should address:
Employees: Depending on your workforce, some will be skilled and used to working independently, while others will only be used to the traditional model of jobs with onsite supervision. As the shift toward independence occurred, employees are relied on to conduct themselves appropriately.
Technology and digital controls: Businesses that have already embedded the use of digital controls and systems are potentially better placed than those currently rolling out remote business operations to address the pandemic’s impact. The importance of robust technology is magnified during the pandemic. Remotely initiating, testing, and monitoring new systems may pose challenges.
Governance, controls, and employee training: Firms must develop ongoing maintenance plans to achieve acceptable conduct levels by way of governance, transparency, and reporting while balancing continued good employee conduct and cultural expectations.
CSC, conduct risk, and COVID
Like most corporations worldwide, we asked our employees to work remotely with little preparation. CSC immediately rolled out a plan to minimize our conduct risk while assuring our employees have the tools they need to do their jobs and take care of our clients.
– We deployed new technology platforms, allowing for seamless processing of client requests and effective collaboration amongst remote employees.
– Executive leadership communicates regularly with employees so they are up to date and informed.
– Employees receive tips to improve the work-from-home experience.
– Clients continue to receive unparalleled service, as our culture is based on recruiting employees of good character from a strong fusion of backgrounds, experiences, knowledge, and perspectives.
– CSC continues our community outreach programmes and initiatives.
CSC works hard at minimizing conduct risk through strong governance frameworks, expectation of teamwork and tenacity, and the ability to be agile among our employees, clients and community.
CSC Global Financial Markets offers globally integrated fund services―positioned across key financial centers―for private equity, real estate, private debt, venture capital, and other strategies. We include and embed positive drivers of conduct within our toolbox, which permeates through our people, product offerings, and to our customer engagement.