Financial institutions have become quite advanced in dealing with classical risks, controlling losses and protecting their balance sheet. But contrary to any of the classical risks, Conduct Risk forces a complete change in paradigm, since it requires financial institutions to put themselves in the shoes of their customers or stakeholders, and protect their customers ? balance sheets (in some cases against the financial institution’s own short term interests). Financial institutions now need to concentrate on protecting their indirect assets, i.e. their customers.
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