A study of risk culture across the financial services sector by a team of Macquarie University researchers has demonstrated that profit-based incentives can adversely impact compliance. Associate Professor Elizabeth Sheedy, who led the study, said it was designed to replicate real-world decisions, and was the first of its kind to be conducted in Australia.  "To ensure it was based on real life scenarios, the participants had to do some simple analysis (with a calculator) and then decide whether to invest. During the one-hour lab session, they could invest in up to 60 transactions.  The experiment also reflected the industry context where the participants were given a risk policy/limit to follow."  The experiment drew on the expertise of over 300 financial services executives - all members of FINSIA. "The results of this new experimental research into risk culture sheds light on the compliance behaviour of financial professionals.  It reveals the impact of incentives and how signals from managers and co-workers affect organisational culture," Sheedy said. "The key finding of the study is that when staff incentives are linked to profits, rates of compliance with risk management policies fall." Chris Whitehead, FINSIA's chief executive officer, said, "It is very evident that the key results of the study support the careful consideration of profit-based incentives currently being debated within the financial services industry and as reviewed recently in the Sedgwick report released by the Australian Bankers Association.  "In FINSIA's view this type of research points to the need for professionalism in financial services. Incentives need to be balanced and individuals also need demonstrated competency, a clear and enforced code of conduct and an ethical culture," Whitehead said. Other findings included:•    personal attitudes to risk management/compliance are a significant determinant of compliance behaviour - this finding has implications for the screening of job candidates, such as considering candidates' attitudes towards risk management in recruitment and promotion decisions; and•    workers from the superannuation sector were less likely than others in financial services to comply with risk policy, although this finding must be treated with caution due to the small sample size - but, if confirmed, may mean that additional work is needed to improve risk culture in that sector. Sheedy said the study "validates that risk culture is an important determinant of compliance behaviour effected by incentives and the behaviour of managers and co-workers."