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Legal and Conduct Risk in the Financial Markets, 3rd Edition by McCormick, Roger; Stears, Chris (22nd March 2018)

Part IX Legal and Conduct Risk Management, 31 Metrics in Conduct Risk and Reputation Management: Predictions and Perception

Roger Mccormick, Chris Stears

From: Legal and Conduct Risk in the Financial Markets (3rd Edition)

Roger McCormick, Chris Stears

Subject(s):
Banking — Financial stability

Despite being over a decade on from and the onset of the global financial crisis, organisations are still battling to regain the trust that was lost. A bank whose business practices might be applauded on the basis of its financial performance might be harbouring an unidentified/unmitigated level of conduct risk that could undermine its sustainability and trustworthiness. One way that stakeholders can assess the bank’s culture, conduct and ultimately, its trustworthiness and ‘investment value’ is through the use of metrics. This chapter explores the use of metrics for both conduct and reputational risk management. It focuses on the use of ‘conduct costs’ as a metric for internal risk management, as well as its potential to serve as a simple, yet defining metric for non-financial performance, firm culture and trust, from an external stakeholder assessment perspective.

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