C08 GARP CODE OF CONDUCT

Act according to GARP code of conduct as well as local laws and regulation relating to risk management. Violation of GARP code of conduct results in temp. suspension or permeant removal, also revocation of right to use FRM designation.  In case of conflict of GARP Code of conduct and laws and regulation, law and regulation prevails

PRINCIPLES—PCC #

1. Professional integrity and ethical conduct #

1.1 Act professionally, ethically and with integrity with employees,  existing and potential clients, public and other practitioners (say FRM, CFA, etc)

1.2 Exercising reasonable judgement in provision of risk services, maintain independence. Must not offer, solicit, or accept any gift, benefit, compensation, or consideration that could be reasonably expected to compromise their own or another’s independence and objectivity

1.3 Must take reasonable precautions to ensure that the Member’s services are not used for improper, fraudulent or illegal purposes

1.4 Shall not knowingly misrepresent details relating to analysis, recommendations, actions, or other professional activities.

1.5 Shall not engage in any professional conduct involving dishonesty or deception or engage in any act that reflects negatively on their integrity, character, trustworthiness, or professional ability or on the risk management profession.

1.6 Not engage in any conduct that compromises the integrity of GARP or validity of the examinations leading to the award of the right to use the FRM designation or any other credentials that may be offered by GARP. 1.7 shall be mindful of cultural differences regarding ethical behaviour and customs, avoid any actions being unethical according to customs.

2 Conflict of interest #

GARP Members shall:

2.1. Act fairly in all situations and must fully disclose any actual or potential conflict to all affected parties.

2.2. Make full and fair disclosure of all matters that could reasonably be expected to impair independence and objectivity or interfere with respective duties to their employer, clients, and prospective clients. Page

3. Confidentiality #

GARP Members:

3.1. shall not make use of confidential information for inappropriate purposes and unless having received prior consent shall maintain the confidentiality of their work, their employer or client.

3.2. must not use confidential information for personal benefit.

Illustration 1:-  Mr Logan, Risk analyst used confidential client information  for his analysis. Later he realizes  that prior permission from the client is required. He decides to take written consent from the client to ratify his usage of client data.

Though  he obtains  written permission from client, this act is deemed as professional misconduct, because GARP code of conduct mandates him to take permission prior to information usage.

PROFESSIONAL STANDARDS #

4. Fundamental Responsibility #

GARP Members shall:

4.1. Comply with all applicable laws, rules, and regulations (including this Code) governing the GARP Members’ professional activities and shall not knowingly participate or assist in any violation of such laws, rules, or regulations.

4.2. Have ethical responsibilities and cannot outsource or delegate those responsibilities to others.

4.3. Understand the needs and complexity of their employer or client, and should provide appropriate and suitable risk management services and advice.

4.4. Be diligent about not overstating the accuracy or certainty of results or conclusions.

4.5. Clearly disclose the relevant limits of their specific knowledge and expertise concerning risk assessment, industry practices, and applicable laws and regulations.

Generally accepted best practices are Best Practices

5. Adherence to generally accepted practice of Risk management #

GARP Members shall:

5.1. Execute all services with diligence and perform all work in a manner that is independent from interested parties. GARP Members should collect, analyze and distribute risk information with the highest level of professional objectivity.

5.2. Be familiar with current generally accepted risk management practices and shall clearly indicate any departure from their use.

5.3. Ensure that communications include factual data and do not contain false information.

5.4. Make a distinction between fact and opinion in the presentation o f analysis and recommendations.

Illustration 2. Which of the following is violation of GARP code of conduct.

Mr Leonardo unknowingly stated wrong assumption of normal distribution of risk report instead of distribution with fat tails.

Mr Tom stated in his report that  Cruise Ltd will default before next month

Mr Dwayne, performed his analysis of forecast of companies share price in next one year

Mr Will smith used confidential information of the client for his investment valuation  as directed by client.

Answer: option 2 is violation because it is providing accuracy as it is said that it will default in next month.