Covid-19 and conduct risk – are you taking reasonable steps?

Girl crushed by toilet paper stampede. People fighting in supermarket aisles over a packet of pasta. Poor behaviour by anyone’s standards. This behaviour is not a huge surprise because we know from the past that in times of panic and financial downturns, people sometimes behave badly – both at work and outside of work. And bad behaviour (or ‘misconduct’) can be financial and non-financial. 

Firms will no doubt be tightening their belts in the coming months. It is precisely at this financially fragile time that you need to keep a close eye on your conduct risk exposure. And as the FCA said in a letter to wholesale general insurance firms in January 2020, “you need to identify what drives this behaviour, and where appropriate, modify those drivers to shape proper conduct”.

Some drivers are obvious. For example, pressure to achieve revenue or growth targets is an obvious driver of the kinds of behaviours that result in mis-selling and other consumer detriment. You may need to consider whether revenue targets are realistic in the wake of widespread financial disruption. Another example is the pressure to cut costs in the business – training and compliance still need to be maintained, as do systems and controls.

There are also more nuanced pressures and behaviours which can have an impact on the conduct risk barometer within your firm.  For example, staff under pressure at home may respond by taking it out on work colleagues (potential bullying and harassment). How are you going to spot this type of behaviour?

Now is the time to dust off your conduct risk MI and make sure you are taking reasonable steps to identify and address poor conduct in all areas of your business – including activity that is outsourced. Things to consider:

Customer outcomes

There is a risk that excessive cost cutting leaves customers under-served or IT systems insufficiently resilient. MI to look at includes:

  • Vulnerable customers. Covid-19 is likely to have a greater impact on your population of vulnerable customers. Also, customers who had not previously been considered vulnerable will become so. Identify the proportion of your customers that identify as vulnerable and determine how many of your staff feel properly trained and equipped to treat vulnerable consumers fairly.
  • Customer access. People are already feeling the strain as access to basic needs such as groceries and health care are limited in the wake of Covid-19. You can monitor relevant MI for early signals of panic behaviour. For example, number of visits to your website, call centre waiting times, and number and duration of systems outages.
  • Quality control. It is tempting to cut corners in a high-pressure environment. Monitor time spent on quality assurance to make sure it remains within your risk appetite.

Product and pricing

The product team may face pressure to get products to market more quickly, or to adapt pricing in the face of difficult market conditions. MI to consider includes assessing which products are being sold / purchased and how this aligns with the intended target market and numbers of financial promotions checks. With regard to pricing, firms can monitor the numbers of products where there is differential pricing (firms must be able to justify any price differences between customers).


Conduct is the way in which we behave; it follows that people are the most important factor in conduct risk. Here are some metrics to measure with regard to your staff:

  • Training. You need to remind staff of the requirements on suitability, market abuse, conflicts of interest and so on. Are you tracking the number of staff that have not completed training? What are the consequences for staff who do not complete training?
  • Speak-up. What trends are you seeing in the number of whistleblowing / speak up notifications and what are the results of HR investigations?
  • Remuneration. Staff whose pay is largely (or entirely) variable, will likely feel under increased pressure. What proportion of your staff have a significant element of variable pay? To what extent are your performance, promotion and remuneration assessments based on ‘how’ individuals perform in addition to ‘what’ they achieve?

2nd and 3rd line

Are your control functions on top of BAU activity? MI to look at includes:

  • The number of overdue risk register actions, compliance monitoring reviews, or internal audit actions.
  • The number of conduct-related policies and procedures that have been updated over the past year (e.g. whistleblowing, code of conduct, complaints).
  • How is breach data trending over time? An increasing number could indicate a lack of compliance while a decreasing number could suggest barriers to breach identification or escalation.

Clearly, it is important to keep a close eye on the MI. But you also need to look beyond the data.  Talk to as many staff as possible to understand the mood.  What are staff and customers worried about? What impact are your front line staff seeing on customers? Which staff are facing pressures at home and how can you support them as individuals?

For all the drivers of bad behaviour, there are as many drivers of good behaviour. In these difficult times we need to look after our staff, our customers and our communities. We can use this global crisis to show our staff and customers how much we value them and in doing so build a positive culture for the future.

How we can help

Bovill have spent 20 years helping clients with conduct risk. We can work with you in reviewing your conduct and compliance processes, particularly in light of the coronavirus pandemic. In particular we can:

  • build or mature your conduct risk framework
  • define your conduct risk metrics and appetite
  • train your staff
  • advise on your vulnerable customers policy and process.
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