The Financial Conduct Authority (FCA) shared its views on “healthy cultures”, making it clear that culture remains a top priority as we head towards 2021. Principal Consultant at LEO GRC, Liz Hornby, reviews the speech and discusses what it means for the GRC training programs of FCA-regulated firms in 2021.
At the end of November, Jonathan Davidson, Executive Director of Supervision - Retail and Authorisations at the FCA, gave a speech at the 6th Annual Culture and Conduct Forum for the Financial Services Industry. The focus of the speech makes it clear that culture, and the conduct that creates and maintains it, remains a top priority for the FCA.
Healthy cultures are purposeful, safe, and support environments that are diverse and inclusive.
- Jonathan Davidson, Executive Director of Supervision - Retail and Authorizations, FCA
The FCA has, to date, refused to provide a blueprint for a “healthy culture”, arguing that firms must decide what is right for their own strategy and business model. Here, however, the FCA has provided firms with some clear messaging around three factors that make a culture “healthy”.
1) Healthy Culture Is Purposeful
Purpose is the bedrock of workplace culture. In his speech, Jonathan Davidson also discussed the increasing recognition that purpose provides firms with a “compass to navigate the uncharted waters” in a crisis.
The COVID-19 crisis has given the financial services industry the opportunity to live its purpose and rebuild trust. Firms have had the opportunity to support customers, including newly vulnerable customers and struggling businesses, and to be, as Davidson put it, “part of the solution rather than the problem.”
The pandemic has also forced firms to test their culture by trusting and empowering their frontline staff more than ever before. Their employees have had to make purpose-led decisions with ingenuity and judgment in a fast-changing landscape. This is the individual accountability and responsibility at the heart of the Senior Managers and Certification Regime (SMCR).
Davidson argues that this calls for “purposeful leaders” who are “proactive about the behavior and competence of those they lead” and who ensure that all staff understand the standard of behavior set by the Conduct Rules.
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2) Healthy Culture Is Safe
Safety is perhaps an umbrella term for a number of current regulatory themes.
Firstly, there’s the psychological safety associated with effective speak-up and whistleblowing arrangements. Davidson argues in his speech that the COVID-19 crisis has called for a “cycle of learning and action from frontline feedback” and that, as a result, leaders need to be “more accessible and more authentic.”
Secondly, there’s the increased importance being placed on the mental health of employees and the safety that comes from a workplace free from bullying and harassment.
Thirdly, there’s a wider agenda within the industry and beyond, associated with climate change and sustainability. In the speech, the FCA refers to the role that the financial services industry will play in rebuilding the economy after the COVID-19 crisis and in responding to the climate crisis.
Recommended reading: ‘The Impact of COVID-19 on GRC Best Practices for Financial Services’
3) Healthy Culture Is Diverse and Inclusive
Here, the FCA focuses on the ongoing need to address the barriers around diversity and inclusion in the industry.
Events like the death of George Floyd, and the work of the Black Lives Matter movement, have increased public awareness of the inequalities and injustices that have no place in the workplace or wider society. As a result, those working within the financial services industry are rightly highlighting that more needs to be done.
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Time for Change
The FCA has indicated its own commitment to change. It is integrating its supervision and policy functions, as part of its wider transformation program, so that it is better placed to take a holistic approach toward making financial markets work “better” (in every sense of the word).
FCA-regulated firms should perhaps take the lead from the FCA by taking a more holistic approach to culture and integrating aspects of culture in all areas of their business, from the frontline to the board.
What Does This Mean for GRC Training Programs?
This means that it is more important than ever that culture and conduct are integrated into GRC training programs. This includes building the skills and confidence required to take culture-led decisions at all levels of an organization.
FCA-regulated firms are also on notice that the FCA will be looking for the inclusion of speak-up and whistleblowing, equality, inclusion, bullying, and harassment in GRC training programs.
If you want to know more about improving your GRC training to help develop a healthier culture in your workplace, have a look at our GRC Academy, or speak to one of our experts.
Liz Hornby, Compliance Expert
Liz joined LEO GRC in 2010 and works as an in-house Subject Matter Expert. Since joining LEO GRC, Liz has completed a Masters Degree in International Business Ethics and Corporate Governance from the University of London and recently completed a PhD on whistleblowing in the UK banking industry.
After studying at Nottingham and Cambridge Universities, Liz qualified as a barrister and went on to work for both the London Stock Exchange and The Securities Association (a predecessor of the Financial Conduct Authority). She then moved into compliance, working for Nomura International plc and Goldman Sachs, before becoming a compliance consultant in 1994. As a consultant, she advised and worked with a broad range of financial services firms.
Liz was Deputy Chairman of the Compliance Forum Committee of the Chartered Institute for Securities and Investments (CISI) for many years and is a part-time lecturer in Corporate Governance and Ethics at the University of London.
Liz Hornby, Compliance Expert
Liz joined LEO GRC in 2010 and works as an in-house Subject Matter Expert. Since joining LEO GRC, Liz has completed a Masters Degree in International Business Ethics and Corporate Governance from the University of London and recently completed a PhD on whistleblowing in the UK banking industry.
After studying at Nottingham and Cambridge Universities, Liz qualified as a barrister and went on to work for both the London Stock Exchange and The Securities Association (a predecessor of the Financial Conduct Authority). She then moved into compliance, working for Nomura International plc and Goldman Sachs, before becoming a compliance consultant in 1994. As a consultant, she advised and worked with a broad range of financial services firms.
Liz was Deputy Chairman of the Compliance Forum Committee of the Chartered Institute for Securities and Investments (CISI) for many years and is a part-time lecturer in Corporate Governance and Ethics at the University of London.