ERM Glossary: Conduct risk
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Conduct risk is the risk that a firm’s conduct (e.g. how it
interacts with its regulator, how it treats its customers, how it organises
itself) falls below what the regulator expects or considers reasonable. More
specifically, it tends to be associated with the risk that the firm’s behaviour
results in poor outcomes for its customers (i.e. poorer than is reasonable from
a regulatory perspective).
Some regulatory bodies, such as the UK’s Financial Conduct
Authority (FCA) are particularly focused on conduct risk, see e.g. FCA Risk Outlook.
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