The rise of the humans

No senior control officer is set to abandon reliance on automated controls, but there is a growing realisation that supervision works better when supported by the appliance of behavioural science.

A hot area in front office control is the sudden popularity of disciplines and thinking borrowed from the field of behavioural sciences. “This wasn’t thought of 12 months ago,” says Rupert Jolley, Chief Control Officer, Global Banking and Markets at HSBC in London. “We’re bringing behavioural scientists to the equation not only to deal with issues that manifested themselves in the Libor and FX-type events, but also as applied to better operational risk management in general.” 

Such techniques have been used for years in industries such as oil and gas, which have to wrestle the potentially calamitous consequences of risky work practices. The safety record of oil and gas rigs has been improved beyond all recognition in the last 20 years or so, significantly through the introduction of more responsible behaviour in the workplace, and banking now sees it has a lot to learn from this. 

The first step would be to guide supervisors to be alert to specific characteristics and patterns of behaviour likely to be exhibited by bad actors. But there are other applications as well.

Actual human contact
They would, for example, be able to help with structuring better training programmes. Banks have invested millions in training schemes to inculcate improved practices and a culture that prizes probity, but they are not always sure that the message is getting home. They’re even less sure that the lessons are being retained and will continue to resonate weeks and months after the training. 

A lot of current training is delivered by desktop, and this, while not to be dispensed with completely, lacks an important element of human contact between the trainer and the trained. “We’re looking at how to apply behavioural science expertise to really think through how we deliver different training on different issues in different settings,” says Jolley.

The other key area in which behavioural science can be used is in the creation of a work environment in which employees feel safe to speak up if they witness errant practices. This is a major topic of concern for banks, and it is one that is regularly stressed in meetings with regulators.

It isn’t, however, easy to achieve. There are plenty of psychological barriers to a member of a team speaking up against another team member. The installation of the best procedures and channels to do this, including whistleblowing, are part of the solution, so that an employee can feel their anonymity is preserved, but behavioural science has its part to play here as well.

“You want people to identify problems, raising their hands and being part of the solution as well. That’s nirvana. How you get people to have the confidence to behave in that manner really does require the support and expertise of behavioural scientists,” explains Jolley. 

Changing hearts and minds
Jolley is not the only senior control officer to highlight this as an area of likely growth in the next year or so.  Others have stressed the same theme, but the application of behavioural science is still in the teething stages. Those banks that are looking at it are still feeling their way. 

What is likely to be seen over the coming year are increasing numbers of pilot schemes, and also investigations into the attributes of team cultures across the business world that are highly successful but also demonstrate a high degree of compliance and good conduct. The underlying assumptions of those behaviours need to be teased out and then the word spread across the organisation.

In keeping with these themes, it is perhaps not surprising, and also refreshing, that Jolley says that the most important control out of the many at his disposal is a human one. The objective that stands above all others is that of better behaviour, and that is most readily achieved by changing hearts and minds rather than by compliance with a set of specific rules. Banks need people who will do the right thing for shareholders and clients, and are ready to intervene to achieve that end. This is the most important control, he says.

“History shows that you can design a pretty good mousetrap, but if you don’t have individuals with the right mindset, then you will continue to have problems,” he concludes. 

Good people do good
There are a lot of moving parts that contribute to the creation of that right mindset. The hiring process has to be geared to look out for the right – and the wrong – attributes. Good conduct needs to be included as a criterion in how performance is assessed, and how that performance is rewarded. Banks are a business, but the days when the only type of performance that mattered was one that earned shards of money have ended. 

While the use of behavioural science methodologies is still embryonic at global banks, it looks as if it will have an increasing role to play in identifying and improving that most ephemeral and still imperfectly understood concept: good conduct. 


If you are interested in this article, then don’t miss out on our Bank Culture and Conduct Digital Debate, US Edition, 09.00-10.30 EDT on 30 June 2020.  Click here to apply for your place now

John Baskott

Welcome to 1LoD's Global Benchmarking Survey and Annual Report 2019, the largest and most comprehensive survey ever conducted on the front office control sector. This year's report was answered by over 30 of the world’s largest financial institutions. We hope you enjoy reading the findings and thank you to everyone who contributed to making it a success. To find out more about upcoming events, our careers hub or other content from 1LoD just visit www.1lod.com

John Baskott, Co-Founder, 1LoD

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