Banks have focused on minimising conduct risk in the past decade, but the experience of other organisations shows they need to look at culture and customer experience too.
Conduct risk is a huge headache in the financial services sector. A wave of misconduct and mis-selling scandals has shaped attitudes towards steering clear of trouble. Often it is compliance rather than a culture of “doing the right thing” that drives a bank’s approach to conduct risk.
Yet conduct risk is seldom the sole cause of problems. Poor culture within an organisation and a strategic failure to put the customer at the heart of the business have a comparable capacity to undermine.
Conduct, culture and customer experience should be thought of as the three legs of a tripod. They are of equal importance, interdependent. Remove or weaken one and there is no longer a stable base for sustainable business.
Many banks have developed strategies to improve conduct, culture and customer experience. But all too often, they address the three ‘C’s in isolation – overlooking the opportunity to combine them for competitive advantage.
This is far less of an issue for the challenger banks, which typically don’t tend to be hampered by a silo mentality. Customer experience is regarded as paramount and clearly defined culture helps manage conduct risk.
By contrast, many established players are so focused on managing conduct risk that it proves a struggle to fix issues relating to culture or customer experience. For instance, tight controls on process may hinder frontline staff from delivering the level of service customers desire.
Taking a strategic, holistic approach to the three ‘C’s brings significant advantages. Streamlining governance helps banks prune back excessive, over-prescriptive compliance and in so doing increase operational efficiency by avoiding duplication of effort.
There are also major returns to be made from boosting business performance by placing greater emphasis on a customer-centric agenda. The Nunwood 2016 Banking Sector Briefing found that if any one of the Big Four banks broke into the top 100 UK companies for customer experience it could generate an additional £3.7 billion in revenue.
Our expertise in rethinking strategy around risk means we are well placed to help organisations develop the right kind of tripod for their situation and needs. The starting point for this journey varies from firm to firm and depends on management style, whether any pressing concerns require immediate attention and agreed business objectives.
Here are three potential options:
A weak or wonky tripod won’t suffice. Banks must keep conduct, culture and customer experience in balance to satisfy regulators; delight, retain and nurture customers; and keep challengers at bay.