What is Conduct Risk?

One of us (Tom) is a professor of organizational psychology whose work focuses on questions of culture and resilience. This incorporates empirical inquiry into organizational safety and accidents, risk and conduct, decision-making and whistleblowing, and the workplace values and practices that tie to outcomes for organizations and their leadership, whether successful or otherwise. The other (Stephen) is an applied behavioral scientist with a long career spent conducting investigative intelligence operations worldwide. Working on behalf of a clientele that has included government agencies, company boards and officers, legal counsel, and institutional investors, his work has involved fraud and corruption inquiries, operational due diligence exercises, as well as litigation support and crisis management.

Our complementary perspectives on the topics that feature in this report are thus informed by a useful mix of academic theory and real-world experience, and our discussions of these tend to prompt interesting questions. One such recent conversation forms the basis of this short article. The question we posed to ourselves at the time — and which we pass along to readers here — can be summed up as this: “What is conduct risk?” On its face, the answer seems simple: the risk of people in organizations acting in ways (intentionally or otherwise) that we’d prefer they didn’t, and as a consequence of which, someone suffers some harm.