Why

Behaviour is central to the performance, resilience and risk management of all organizations and is especially important to financial services firms whose business model is built on trust; a quality that arrives on foot and flees on horseback.

Operational Resilience

Operational resilience is a top priority for all firms, given the reliance on technology and third parties, the increase in cyber threats and as regulatory expectations tighten. However, resilience is not just a technical challenge, with the lessons from operational incidents and outages in banks and other industries repeatedly highlighting the central role of human behaviour.

Performance

Behaviour and culture are critical to company performance. Innovation is powered by agency, collaboration and transparency. Costs can escalate where there is duplication, inefficiency and a preference for engineered and expensive technical solutions over behavioural insight. New businesses or changes in process will not optimized without consideration of the impact on the behaviour of those involved.

Going concern & systemic

risk

Behavioural factors that fuelled the 2007/8 Financial Crisis included over-confidence, short termism and groupthink, mixed with moral hazard and motivated reasoning. The events of 2023, with the collapse of Silicon Valley Bank and other US firms, together with the emergency takeover of Credit Suisse by UBS, served as a reminder that behavioural risks can threaten the future of an individual firm and fuel systemic risk.

Despite its criticality many financial services firms still struggle to address behavioural risks in a meaningful and sustained manner. Disparate ownership, a lack of consistent understanding and skilled resource, and a difficulty in assessing the current state and judging progress hinder its development.

A new approach is needed.