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 Business Plan 2021/22.

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