For banks, nurturing a strong reputation is critical, given limited differentiation in banking products and the ease with which customers can switch institutions. Accenture’s report, Protecting and Building Firm Reputation: Addressing the Conduct Challenge, finds a strong brand reputation can drive customer loyalty and trust. Good conduct control, in turn, helps build and protect a reputation.
Reputation and conduct control can also underpin regulatory relationships. As regulators seek evidence of “spirit of the law” alongside “letter of the law” compliance, a strong reputation can make the difference. A good reputation also supports talent development—essential when key talent is in short supply.
Flipping the coin, a poor conduct risk management strategy and ineffective corporate governance could lead to costly reputational damage, losses in brand value, lost customers, and even steep fines and penalties. Between 2010 and 2016, fines based on misconduct cost financial firms $300 billion.1
So how can firms build good conduct controls and protect a strong reputation?
Accenture’s paper cites a 2015 study by the Reputation Institute2 that identified six reputation drivers. Turns out, two of the top three drivers are conduct focused: governance and citizenship. For financial businesses, investments in strong corporate governance and customer centricity are a priority. As well, businesses can work to align with community initiatives tied to customer interests, including investing in local non-profits and similar activities.
But conduct risk management—and reputation building—is more challenging than this. After the global financial crisis, firms now need to keep an eye out for vulnerable customers. New communication technologies mean financial firms are on the spot for responding, instantaneously, to customer complaints and inquiries raised in social media.
The right conduct risk program can support a business’s efforts by reinforcing a financial firm’s values, and by helping sustain the behaviors that can strengthen a firm’s reputation.
Set the tone from the top. Strong, clear leadership helps support an enterprise-wide conduct program.
Build a conduct and reputational risk framework. Assess gaps, and close them with a cross-functional effort.
Compensate, enforce and train. Ongoing training, involving real-life misconduct scenarios, and performance incentives are tools that can solidify a framework.
Implement at the business unit level. How can conduct risk concerns guide business unit efforts?
Build conduct risk data, analytics and reporting capabilities. Identify metrics and build key performance indicators (KPIs) to manage the effort.
Reputational damage can be costly in terms of time, money and lost customers. Financial services firms can build a solid reputation if they underpin their efforts with an effective conduct control framework.