In June 2023, the Central Bank published a thematic assessment examining the approach taken by firms’ Boards and their senior management to foster and embed an effective conduct-focused culture in Wholesale Market Firms. This follows the Central Bank’s increased focus on conduct risk and culture in recent years, with the 2019 Wholesale Market Conduct Risk Industry publication and the 2023 Securities Markets Risk Outlook Report outlining the importance of fully embedded effective wholesale market conduct risk frameworks.
The Central Bank’s thematic assessment evaluated firms’ market conduct risk management frameworks to support and enable firms’ Boards and senior management to deliver an effective conduct-focused culture, studying a cross sector cohort of firms engaged in Markets in Financial Instruments Directive (MiFID) activities.
Read our report below where the Risk & Regulatory Consulting team have summarised the key themes from this report and how KPMG can assist you when considering the effectiveness of your organisation's Wholesale Conduct risk and culture.
Key findings and observations
The Central Bank identified a number of areas firms must work on to ensure that the desired culture is effectively embedded into their day-to-day operations, supporting governance arrangements and control frameworks. The key findings are set out below:
- Board and senior management discussion and challenge of conduct risk and culture requires improvement. This is compounded by often deficient Management Information (MI) and reporting, inhibiting the ability of the Board to manage market conduct risk and promote an effective conduct-focused culture.
- Responsibilities for managing and mitigating market conduct risk are not reliably conveyed in the role profiles and objectives for senior management, inhibiting accountability.
- The onset of hybrid working has required the review of governance and control frameworks to ensure these are sufficiently robust to manage emerging conduct risks.
- Boards and senior management should consider how they can enable an inclusive “speak-up” culture that fosters and promotes an environment where staff can raise concerns.
How can KPMG help?
Market misconduct has been a recurring theme in financial markets for many years. While the challenges of managing wholesale conduct are significant, firms are continuing to develop ways to mitigate the risk more effectively and to embed sustainable change in front office, oversight functions and key support teams.
KPMG’s Risk & Regulatory Consulting team is at the forefront of this effort, working with the largest financial service firms supporting them to manage conduct risk. We have an in-depth understanding of regulations, industry standards and emerging good practice.
We incorporate the latest global thinking into the provision of our services in the financial services sector and provide best practice advice. KPMG’s conduct risk and culture professionals can help financial services organisations transform regulatory compliance and consumer / investor protection into a strategic business advantage.
