Assessing Conduct Risk: A New Challenge for Sustainable Corporate Governance

This paper addresses the topic of the assessment and management of conduct risk within financial institutions. The research also focuses on some of the new major governance topics on the board’s agenda, stressing the value of corporate reputation within the company’s culture. Attention is also drawn to the need to introduce a new dynamic, system-wide perspective on culture within financial organizations, attempting to align formal and informal aspects and to focus on individuals. The topic of conduct is thus explored from the point of view of individuals within the organization, analysing different factors which might influence their behaviour, such as incentives, peer influence and other psychological factors. The attention is then focused on the importance for people at any level of the organizational structure to spread the values set from the top. Finally, possible solutions are suggested, such as the introduction of internal models tailored to assess the organizational conduct.