Iftach Drori
Head of Marketing
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Culture is widely viewed as the typical behaviours that characterise a firm, sometimes likened to ‘how people behave both around others and when they’re along’. In the words of Alison Cottrell, CEO of the Banking Standards Board, “A good culture is about more than ensuring good people don’t do bad things – it’s about enabling good people to do better things”.
For financial firms, these behaviours could include things like how aggressive sales staff are instructed to be when selling products and services, or even how much firms care about things like the wellbeing of their employees.
It’s becoming crystal clear that the culture of financial firms matters.
In a widely used quote, Andrey Bailey, then Chief Executive of the Prudential Regulation Authority said, “my assessment of recent history is that there has not been a case of a major prudential or conduct failing in a firm which did not have among its root causes a failure of culture as manifested in governance, remuneration, risk management or tone from the top.”
More recently, in a speech delivered in December 2018, Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA), said “our message to firms is clear: non-financial misconduct is misconduct, plain and simple” and that instances of non-financial misconduct are “potentially relevant to our assessment of that firm.”
In addition to regulators, bodies like the Banking Standard Board have launched to try and ensure that firms take actions which make them more trustworthy. And with the recent news about Revolut, one of Europe’s fastest growing FinTechs, now largely viewed as a culture challenge, it’s clear that the theme of culture is not going away anytime soon.
Developing and communicating behaviours is relatively easy. It wouldn’t take most financial firms that long to come up with things like ‘we put customers first’. The true test is how far to these behaviours permeate through an organisation. Are they actually being lived and breathed on a daily basis and by all staff, irrespective of seniority?
And yet, for something so important, how to measure culture, let alone change a culture, remains open to some lively debate.
So far, most financial firms have focused on asking employees how they perceive the culture of firms, through internal surveys. Common questions include ‘how would you describe your firm in 3 words’. The Banking Standards Board in the UK also runs an annual assessment, which helps financial firms put their feedback in the proper industry context.
But what’s clearly missing is a robust tracker of culture across the full financial services landscape, something that includes both employee feedback and customer feedback, which would enable a truly sophisticated 360° culture assessment. Such a RegTech utility is not simply a pipedream, but something that a number of firms, including Smart Money People are actively working on.
In a speech on Tuesday 23rd April 2019, Andrew Bailey, now the CEO of the FCA, talked about a post-Brexit future which could see the UK return to a more principles-based system of regulation. Under this vision, culture only becomes more important.
And as more exotic financial products come to market, being able to robustly assess the culture of financial firms will become even more important. The truth is that not every new innovative product or service that firms launch will be good for customers. Truly understanding and being able to assess the culture of financial firms will increasingly be important for forward-looking regulators, and financial firms. The RegTech firms that wish to do business with them can not afford to overlook the importance of culture.
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