7 out of 10 local financial services firms clueless about conduct risk: survey

Small firms are particularly vulnerable.

A series of high profile financial scandals around the world have forced financial services companies to focus on conduct risks, such as how customers are treated, how risky products are sold and how conflicts of interest are dealt with.

However, a staggering 72% of financial services firms in Singapore surprisingly do not understand conduct risk very clearly, according to a report released today by Robert Half.

In Singapore, 91% of CFOs confirmed that the current regulatory focus on conduct risk was having a significant (20%) or moderate (71%) impact on their business operations and practices.

However, when asked if their company had a very clear view of conduct risk, only 27% of Singapore financial services leaders said yes. This is well behind the UK at 42%, and slightly better than Japan at 25%.

In Singapore, mid-sized firms have the clearest view about conduct risk in their business, at 44%. On the other hand, small firms have the lowest level of clarity at 19%. Only 26% of senior financial services leaders of large firms said their organisation is very clear about conduct risk.

“Small firms often lack the expertise and the resources to fully understand how conduct risk impacts them. Large firms engage in more complex dealings so you would expect their senior business leaders to have a tougher time getting a handle on conduct risk. Mid-sized firms have enough resources to manage the risk, and usually engage in a more limited range of activity than larger firms, so there are lesser areas for conduct risk to occur. Few acts do more harm to an organisation’s reputation than a scandal involving misleading vulnerable consumers. Being caught selling inappropriate and risky products to the elderly or less educated can destroy a company’s brand – as well as the investor’s life savings,” said Stella Tang, Managing Director of Robert Half Singapore.