Conduct Risk
Definition
The risk that a firm's behaviour, products, or services will result in poor outcomes for customers, damage to market integrity, or harm to effective competition. Conduct risk encompasses mis-selling, conflicts of interest, product design failures, unsuitable advice, and failures to treat customers fairly.
Regulatory Context
Conduct risk has been a central supervisory priority since the 2008 financial crisis, driven by large-scale mis-selling scandals (PPI, interest rate hedging products). The FCA's supervisory approach is fundamentally built around conduct risk, and the Consumer Duty has further elevated expectations.