Future proof risk management
Banks try to prevent misconduct by detecting, monitoring and sanctioning employees who violate standards. Insights from behavioural science show that this is often not sufficiently effective and can even be counterproductive. How do you reduce the risks?
Banking scandals threaten public confidence in the integrity of the financial and economic system, and the economy as a whole. It is not without reason that banks try to prevent, for example, their own traders from going beyond their remit and then allowing the media to report on illegal and unethical actions. The fines imposed by regulators are then only a part of the total damage inflicted. By assisting an international bank in preventing unethical behaviour, we help to make their risk management more future-oriented; an important factor in maintaining a stable economy, and combating recessions and increasing inequality between rich and poor. This is how we contribute to increasing public and corporate confidence in banks.
The observance of procedures and the use of controls and sanctions for violations do not yet constitute a good system for preventing problems. This is because it is not only the system, but often people’s behaviour that underlies risks. By identifying and understanding patterns of behaviour and the root causes of future or potentially recurring misbehaviour, interventions can be put in place to prevent this. By applying these insights and interventions to risk management, senior management was able to work from a behavioural science perspective, in a more forward-looking and preventive manner in order to reduce risks. Think of insights about (in)effective steering, group dynamics and conflicting goals, for example, or awareness of the impact of behaviour and culture on the emergence of risks.
Our insights and interventions have helped senior management to improve the bank’s risk management from a behavioural perspective. They have also taken measures to reduce risks. By giving this bank insight into the causes of risky behaviour, we increase their ability to combat financial economic crime. This, in turn, helps strengthen social trust in banks and in the financial economic system.