Enhancing Compliance of Financial Service Industry Through Understanding and Predicting Employees’ Conduct Risk

Conduct risk management is a topic of great importance to financial service firms. Misconduct from staff members in financial institutions can result in substantial costs. However, compared to other types of risk faced by financial institutions (e.g. credit risk, market risk, liquidity risk), conduct risk and the related reputational risk have been understudied. One of the main reasons for the limited research in this area is the lack of data available assessing employees’ misconduct.