REPORT: "Are profit based incentives compatible with a risk culture?"
The August 2017 Experimental Research report titled "Are profit-based incentives compatible with a risk culture?" should be required reading for compliance professionals. The Macquarie University/FINSIA publication reinforces observations made about both Wells Fargo and Commonwealth Bank, but we think the experiment highlights two profound points:
- Incentive based models don't necessarily increase profit but they do mean that fewer 'bad deals' are rejected. This suggests that profit-based incentives could be retired with little material impact; and
- Personal attitudes to risk management/compliance are a significant determinant of compliance behaviour. This suggests that the industry's focus on formal technical competencies are less important than proper reference checking and ethical training.
To download the report click here.