In December 2018, Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered a speech on diversity in the financial services sector. Woolard painted an interesting picture of the plight facing firms in addressing diversity and inclusion—and why it’s so important to do so.
In a wide-ranging speech, Woolard delved into both the FCA’s own performance as well as that of the financial services as a whole.
Here are the highlights.
Financial Services Firms Still Have a Long Way to Go to AddressD&I
Woolard shared a range of powerful statistics that shed light on the current performance of financial services firms in addressing D&I issues.
On gender diversity, he notes that only “15% of directors and 6.5% of chief executive officers (CEOs) across our regulated population are women.” And while he points out there has been an increase in senior risk management and compliance functions, the percentage of these roles held by women is still just 15%.
Regarding social mobility, which is becoming an increasingly prominent issue in UK society, he referenced the Social Mobility Index. The index, created annually by UK charity, The Social Mobility Foundation, assesses organizations on their efforts to improve social mobility.
Woolard notes in his speech that only five firms featured in the top 50 list. This is in contrast to professional services organizations (such as legal and accountancy firms) which dominate the top ten.
Related reading to download: 'Diversity & Inclusion: How To Mitigate The Invisible Business Risk [Ebook]'
Diversity Impacts Business Performance
One of the key points Woolard made is that diversity is more than just a tick-boxing exercise. He is at pains to make it clear that improving diversity within an organization can directly impact business performance. By enriching the diversity of your organization, you increase the range of opinions and voices – and this leads to better, more considered decision-making.
“We need varied life experiences – race, age, social background, sexual orientation, education… the list goes on. True diversity comes when you’re open to – and make space for – them all.”
There’s research that backs up Woolard’s message. A 2018 report by the Centre for Economics and Business Research (CEBR) analyzed 500 UK workplaces to understand the relationship between D&I and business performance.
The results are hard to ignore:
- The UK’s most ethnically diverse workplaces are 12 percentage points more likely to financially outperform their industry average than the least ethnically diverse workplaces.
- Firms with the most developed diversity policy are 15 percentage points more likely to financially outperform their national industry.
Regulators Look at Diversity and Inclusion
It may be interesting for many firms to read that the FCA actually considers D&I within their regulatory focus and that ‘non-financial’ conduct is also part of their assessments.
For the FCA, a firm’s culture is a key component in their assessment of their overall conduct. Woolard makes the connection between strengthening diversity and improved conduct in organizations, saying: “Where a culture is open, risks are flagged, experiences are shared and decision-making is enhanced. But in a culture where colleagues are afraid to speak up, unethical behaviour can gain a foothold.”
Woolard also emphasized the role of The Senior Managers and Certification Regime (SMCR) in assessing non-financial misconduct. Under the regime, the FCA has ruled that individuals had not been behaving in a ‘fit and proper’ way on the basis of non-financial conduct.
“The way firms handle non-financial misconduct…is potentially relevant to our assessment of that firm, in the same way that their handling of insider dealing, market manipulation or any other misconduct is,” he said.
Diversity and Inclusion Training Is Part of the Solution
As Woolard concludes, it can take time to change ‘hardened attitudes’, so firms looking at improving diversity and inclusion should develop a long-term strategy that looks at three key areas:
- Company policies and culture: policies should be clear and easy to understand and help reinforce a culture of openness.
- Training: some roles will require specialized training (such as hiring managers). For the wider business, diversity and inclusion eLearning courses can be an effective way to ‘start the conversation’ and highlight the subject to the wider workforce.
- Internal communications: keep the issue at the forefront of your people’s minds with regular campaigns throughout the year.