Regulatory Focus on Conduct Risk—Hungarian Case Study on Qualitative and Quantitative Tools for Risk Mitigation

Orsolya Szendrey, Robert Szini, Andras Tomsics

Abstract


Due to the inadequate conduct of their business, financial institutions have recently sustained severe losses, as a result of which the management of conduct risks has become increasingly prominent in regulation. This paper describes the position of conduct risk within the framework of risk management, and uses Hungarian and international examples involving major losses to illustrate the need for the adequate management of conduct risks. This is followed by a description of how to manage the type of risk in question using the qualitative and quantitative tools of operational risk management. A quantitative analysis is then carried out to illustrate the effects on capital requirement achieved by taking into account conduct risks in various components of the internal models.


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DOI: http://dx.doi.org/10.22158/jepf.v4n2p164

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Copyright (c) 2018 Orsolya Szendrey, Robert Szini, Andras Tomsics

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