Watch the full presentation Video on Youtube: http://youtu.be/775wFMtG2oE Feb 19th 2014 "Enabling Effective Conduct Risk" Webinar 10:00-11:00 GMT Focusing on the FCA and the Conduct Risk agenda, in this webinar, "Enabling Effective Conduct Risk", StratexSystems will demonstrate how firms can effectively manage conduct risk by taking an integrated approach to strategy and risk management, and how the StratexPoint solution can support firms as they seek to meet the challenges of conduct risk and engage effectively with the new regulator around this agenda. During the webinar, StratexSystems will outline: ‘The Seven Key Challenges of Conduct Risk Management’; Managing and embedding Governance into the business Definition and embedding the Business Model Definition and execution of the Business Strategy with customers at its heart Enabling & embedding Conduct Risk specific processes Process Management, and specifically New Product Development Product level performance and risk management Conduct incident reporting and analysis StratexSystems will demonstrate during the webinar that Enabling Effective Conduct Risk Management is not about throwing everything that one currently does away and starting afresh but rather building on existing strategy execution and risk management processes and tools. Additionally, during the webinar we will demonstrate that if firms approach Conduct Risk from the right perspective, they can generate significant value, beyond simply satisfying a regulatory compliance demand.

1. StratexSystems webinar
Enabling Effective Conduct Risk
Management
19/02/2014

2. Introductions

CEO & Co-founder of
StratexSystems, the leading
provider of integrated strategy &
risk management solutions on the
Microsoft SharePoint platform

15 years plus in strategy and risk
management

2006/07 -12 month / 21
organisation research project into
the integration of strategy and risk
management

2008 - Created the Risk-Based
Performance Management
methodology during various
strategy and risk related
engagements in the city
Page  2

3. About StratexSystems
Our Mission
To provide an integrated strategy and risk management solution which enhances
strategy execution, improves capital efficiency by 15% and reduces operational
losses 25% while providing 100% confidence that your business is operating within
appetite.
One client‟s results
“Since HML commenced its initiative to
implement an enterprise-wide risk
management framework in March
2008, we have reduced our Pillar 2
capital by 81.2% while delivering a
94% reduction in the value of errors
and a 63% reduction in the volume of
errors”
– Head of Enterprise Risk,
Homeloan Management Limited
Page  3

4. The creation of the FCA introduced a new
regulatory approach
FCA
Objective
To make relevant markets work well so consumers get a
fair deal.
1.
Outcomes
2.
3.
3 Pillars
Regulatory
Approach
Page  4
Consumers get financial services and products that meet their needs, from
firms they can trust;
Markets and financial systems are sound, stable and resilient, with
transparent pricing information; and
Firms compete effectively, with the interests of their customers and the
integrity of the market at the heart of how they run their business.
Firm Systematic
Framework (FSF)
Event-driven work
Issues and products

5. The creation of the FCA introduced a new
regulatory approach… and some confusion!
But what is Conduct Risk?
The Risk of a firm treating its
customers unfairly and
delivering inappropriate
outcomes
What is Conduct Risk Appetite?
The level of Conduct Risk a
firm is willing to take to achieve
its strategic objectives
"we do not have a master definition of 'conduct risk‘ FCA
Page  5

6. What has the FCA been saying to the market?
Page  6

7. What has the FCA been saying to the market?
Page  7

8. What does the FCA really want from firms?


“Good profits”

A strategic approach with
strong senior management
and board engagement

Cultural Change &
Accountability

Page  8
Customers at the heart of
your firm‟s business model
and strategy
Not a narrow focus on
compliance to rules

9. How to meet FCA requirements…and enable
effective conduct risk management (and strategy
execution)
Risk-Based approach to
managing your firm
Proven approach to drive &
sustain change
Enabling software solution which
embeds a Risk-Based approach
Page  9

10. Taking a Risk-Based approach to managing your
firm
We wrote the book on
integrating strategy &
risk management
Page  10

11. Risk-Based Performance Management (RBPM) is a holistic
and integrated approach to strategy execution and risk
management
What are we trying to
achieve?
What is our Risk Appetite?
Strategy
Management
Appetite
Are we on track?
Performance
Management
Risk
Management
Governance & Communications
Culture
Page  11
Are we operating
within appetite?

12. The Risk-Based Performance Management (RBPM)
methodology is based on seven management disciplines
Business Drivers
Capital
Income
2. Manage
Performance
1. Set
Strategy
Appetite
Page  12
Share Price
?
5.Governance
4. Appetite
Alignment
3. Manage
Risk
Shareholder Value
Reputation
Appetite
7.Culture
6.Communications
Economic value
add
Profit
?

13. Central to this integrated model for Strategy and Risk
Management is the Strategy Map
Page  13

14. Financial
Customer
Internal Process
Learning &
Growth
Page  14
Increase Shareholder
value
The Strategy Map articulates how
an organisation creates value
Objective
Statement of what
strategy must
achieve and what’s
critical to its
success
KPIs
How success in
achieving the
strategy will be
measured and
tracked
Targets
The level of
performance or
rate of
improvement
needed
Initiatives
Key action
programs
required to
achieve Priorities
Sustainable Growth
Objective
KPIs
Targets
Initiatives
Increase Investment
Returns by 25%
Increase
Investment
Returns by 25%
YTD % Increase
in investment
returns
25%
 Implement
new
portfolio mgt
system
“their ROI is
aligned to my
appetite”
Increase Retention
of competent staff by
10%

15. Financial
Customer
Internal Process
Learning &
Growth
Page  15
Increase Shareholder
value
However, to create value, risktaking must be aligned to
strategy…
Objective
Statement of what
strategy must
achieve and what’s
critical to its
success
Appetite
How much risk
are we willing to
run to achieve the
objective?
Exposure
How much risk
are we currently
running?
Alignment
Is our current
risk-taking
aligned to
appetite?
Sustainable Growth
Objective
Appetite
Exposure
Alignment
Increase Investment
Returns by 25%
Increase
Investment
Returns by 25%
Moderate
High
Over-exposed
“their ROI is
aligned to my
appetite”
Increase Retention
of competent staff by
10%

16. Financial
Customer
Internal Process
Learning &
Growth
Page  16
Increase Shareholder
value
“their ROI is
aligned to my
appetite”
Sustainable Growth
Increase Investment
Returns by 25%
Increase Retention
of competent staff by
10%
Effective risk management also
supports value creation and
protection...
Objective
Statement of what
strategy must
achieve and what’s
critical to its
success
The threats and
opportunities (risks)
exist which may
impact achievement
of objectives
Objective
Risks
Increase
Investment
Returns by 25%
 Unexpected
changes in
interest rates
 Unexpected
Equity
movements
Risks
Thresholds
The appetite and
tolerance
thresholds used
to monitor risk
Mitigation
The activities
undertaken to
manage risk
Thresholds
Mitigation
 Appetite
 Tolerances
 Controls
 Initiatives
 Policy &
procedures
 Processes

17. Having clear and achievable financial Drive Shareholderis critical to ensure the firm is
objectives
value
Deliver Revenue and will be around to provide on-going service
sustainable
Control Costs
Growth
Customer
Financial
The Strategy Map can be used to demonstrate the
role customer outcomes play in the firm‟s strategy
“We have
By convention,are clear
customer outcomes are expressed“Their solutions you would like to hear
is phases
“Their fees
quick, convenient
“We received good
continue to
and customers use to describe your firm and meet our
access to our
value”
yourfair”
products/services financial
changing needs”
Internal
Processes
info”
Deliver outstanding
Learning &
Growth
Ensure effective
To deliver financial and customer outcomes, we must be clear about the key processes
customer service
Continuously seek to
Complaints
Drive sales execution
@ POS
understand client
handling
which will enable us to deliver those outcomes.
needs
“We leverage our data to
“We sell the right
“We align our
Underpinningpositivedelivery of the key processes,the right
the customer
financial and customerappetiteincentivesis
outcomes
deliver
products, to
to our
& desired
outcomes
people, the right time”
behaviours”
the organisational culture.
Page  17
Information Capital
Cultural Capital
Human Capital

18. The four perspective Risk Map can give greater insight
into the risk profile, specifically from a Conduct
perspective
1.
Risks related to Financial
outcomes


1
2
2.
Risks related to Customer
outcomes


3.
4

4.
What are our process risks and
how are they changing?
Are we operating within our risk
appetite?
Risks related to Culture


Page  18
Are we operating within our
conduct risk appetite?
What are the current and
emerging conduct risks?
Risks related to Internal
Processes

3
Is our firm sustainable?
Will we be around to provide ongoing service and product
support?
What are our culture risks and
how are they changing?
Are we operating within our risk
appetite?

19. Appetite Alignment Matrix is one of our key innovations and
a key tool for monitoring the alignment of risk-taking to
strategy
 Enables monitoring of
the alignment of risktaking to strategy
 Enables the
monitoring of risks
which are outside of
appetite
Are we operating within (your conduct)
Appetite?
Do you have the „tools‟ to know?
Page  19
 Also shows where we
are taking too much
and not enough risk
 Changes the risk
conversation

20. Like objectives at the strategic level, a risk and controls
framework can be wrapped around processes
Processes
Risk
Appetite
Actions
Key Risks
KRIs
KPIs
Actions
From a Conduct Risk
perspective, define, manage and monitor key
customer processes, such as New Product
Development, Sales Execution, Customer
service, Complaints handling etc.
Assessment
Events
KCIs
Page  20
Key Controls
Actions
20
Assessment
Certification

21. At an operational level, process and initiative
Matrix‟s are used to align the operational level to
the strategic
 Operational Alignment Matrix
can be used to align the
operational level to strategic;
 Objectives
 Risks
 Controls
 Use percentages to show the
level of alignment





Page  21
100% - Very Strong Alignment
75% - Strong Alignment
50% - Moderate Alignment
25% - Weak Alignment
0% - No Alignment

22. How to meet FCA requirements…and enable
effective conduct risk management (and strategy
execution)
Risk-Based approach to
managing your firm
Proven approach to drive &
sustain change
Enabling software solution which
embeds a Risk-Based approach
Page  22

23. The Risk-Based Performance Management (RBPM)
roadmap can be used to guide the implementation of an
effective response to the Conduct Risk agenda
Execution
Formulation
Define
Strengths &
Weaknesses
Define
Strategic
Goals
Define
Business
Drivers
Align Risk
Appetite &
Strategy
Board
Define
Strategic
Controls
Define
Strategic
Objectives
Define the
Strategy
Define the
Business
Model
Page  23
Define
Strategic
Risks
Define Risk
Appetite
Define
Indicators
Define
Processes
Define
Initiatives
Define
Operational
Risks
Define
Operational
Controls
Executive
Assess Risks
& Controls
Monitor
Appetite
Alignment

24. The RACI model is embedded within our solution and is
used to clarify and embed accountabilities for (customer)
outcomes
“The doers”
Those people working on
delivering the objective, managing
the risk or applying the control.
“Keep in the picture”
Position(s) that need to know
about decision or action related to
the objective, risk or control.
Page  24
“The buck stops here”
P
Those with Yes/No authority
related to the objective, risk or
control.
“Keep in the loop”
Those involved prior to
decisions or action related to
the objective, risk or control.

25. How to meet FCA requirements…and enable
effective conduct risk management (and strategy
execution)
Risk-Based approach to
managing your firm
Proven approach to drive &
sustain change
Enabling software solution which
embeds a Risk-Based approach
Page  25

26. Introducing StratexPoint
Built on the ubiquitous
SharePoint platform
Supports each of the Three
Lines of Defence
Our solution delivers:
 High ROI
 High User Adoption
 High Levels of assurance that your
business is operating within appetite
Comprehensive in nature but
modular in deployment
StratexPoint is also a proven tool for supporting the 4th Line of Defence
Page  26

27. StratexPoint is one of the most complete strategy
execution & risk management solutions available
today
1st Line
Strategy-focused, Risk
Aware culture enabled
and embedded
Easy access to
powerful MI &
Analytics
Page  27
3rd Line
Take a Risk-based
approach to auditing and
business assurance
Risk-Based Performance Management
Balanced Scorecard & Strategy Map
Enterprise & Operational Risk Management
Risk-Based Internal Auditing
Business driven
design
Leverage your
existing
technology
2nd Line
Work with the business
to build competitive
advantage



78% of Fortune 500 companies
Every day for the past five years, 20,000 workers have
joined the ranks of SharePoint users
One in every five knowledge workers now has access to
SharePoint

28. Underpinning our solution is a „conceptually sound‟
data model which embeds a Risk-Based approach
Entity
Business
Drivers
Objectives
Risk
Appetite
Processes
Initiatives
Systems
People &
Roles
Assets
Operational enablers are aligned to strategy
Actions
Governance
Key Risks
KRIs
KPIs
Actions
Assessment
Events
Commentary
Workflows
Audit
Trails
KCIs
Build a strategy focused, risk aware culture
Page  28
Key Controls
Actions
Assessment
Certification

29. Our solution enables firms to the requirements of
Conduct Risk whilst driving business change and
value
Entity
Business
Model
Customer
Objectives
Customer
Risk
Appetite
Customer
Processes
Customer
Initiatives
Customer
Systems
Customer
People &
Roles
Customer
Assets
Operational enablers are aligned to strategy
KPIs
Actions
Customer
Key Risks
KRIs
Governance
Actions
Assessment
Events
Commentary
Workflows
Audit
Trails
KCIs
Build a strategy focused, risk aware culture
Page  29
Customer
Key
Controls
Actions
Assessment
Certification

30. Example of a Overview Conduct Risk dashboard
Page  30

31. Example „Bubble‟ up Dashboard
Page  31

32. Example Strategy Map
Page  32

33. Example Risk Map
Page  33

34. Indicator „Line of Sight‟ Dashboard
Page  34

35. Q&A
Page  35

36. Stratex Conduct Risk QuickStart
Delivering Effective Conduct Risk Management…
Fast, at a low cost with guaranteed delivery

37. About the Stratex Conduct Risk QuickStart

Pre-built Conduct Risk template
solution and implementation
plan to enable an effective and
proven approach to conduct risk.

Quickly establish the platform
and approach to enable you to
demonstrate you have an
effective approach to conduct
risk.

Proven, low cost, low risk
solution

Clear set of deliverables within
agreed timescales (30 – 90 days
depending on initial scope)

Guaranteed delivery
Page  37

38. Conduct Risk QuickStart Overview Plan
Discovery
Design
Build
Deploy
Installation
(SharePoint & Reporting)
UAT
Live
Deploy Stratex Conduct
Template
Review existing conduct approach
& MI
Prepare and import existing conduct
data (if applicable)
Develop Conduct Risk ‘Reporting
pack’ & custom MI
StratexPoint Training
Admin
Power User
Next 90 Days
Workshop & Roadmap
Handover
30 to 90 Days (depending on scope)
Page  38

39. Conduct Risk QuickStart
 Pre-built Conduct Risk
template including;
 Conduct Risk Strategy Map





& Risk Map
Conduct Risk Appetite
approach & tools
Conduct Risk Performance
& Risk Scorecards
Conduct Risk register
Conduct Risk controls
Conduct Risk indicators
(KPIs, KRIs & KCIs)
 Accountabilities model
(RACI)
Page  39

40. About the Stratex Conduct Risk QuickStart
What is included?












Scoping and discovery workshops
Support the initial installation of
StratexPoint on UAT and Live
Deployment of a Conduct Risk template
Import of existing Conduct Risk
information or data
User requirements works to refine the
Conduct Risk approach & framework
1 day Administration training course
2 day Power User training course (x 1 –
5)
Deployment and review all standard
reports
Create a single customised Conduct Risk
„reporting pack‟
Full project management approach
Next 90 days roll-out & embedding
workshop and roadmap
25 User Licenses of StratexPoint
Who will deliver & what will it
cost
 The QuickStart is delivered by



1 Business consultant
1 Technical consultant
1 Project Manager (50%)

The QuickStart is typically
delivered in between 30 – 90
days depending on initial
scope.

The QuickStart includes a full
money back guarantee

41. Contact details
Andrew Smart
CEO
StratexSystems
Email: andrew.smart@stratexsystems.com
Blog: www.riskbasedperformance.com
Web: www.stratexsystems.com
LinkedIn: http://uk.linkedin.com/in/ajsmart
Twitter:@AndrewJSmart
Page  41