With customer confidence still recovering, restoring trust in the financial services industry to its former level is still some way off.
The recent publication of the FCA’s 2016/17 business plan saw ‘culture and governance’ as one of their top seven priorities, proving that the regulators are determine to restore customer confidence.
The FCA will be expecting organisations to effectively manage the complex and seemingly elusive web of culture that pervades their business, with boards taking on full accountability. Similarly, during his speech on ‘Culture in financial services – a regulator’s perspective’, Andrew Bailey (then CEO of the PRA) highlighted that regaining customer trust and confidence is reliant on good culture.
Moreover, the regulator will continue to exercise its influence over firms on all the elements that contribute to defining culture. Culture is also a prominent feature in the Chartered Institute of Internal Auditors’ (IIA) Financial Services Code which requires internal audit to include in its scope the risk and control culture of the organisation.
This includes assessing whether business activities, behaviours and ‘tone from the top’ properly reflect the values, ethics, risk appetite and policies of the organisation.
With heightened regulatory focus, IIA requirements and the basic reality that poorly managed cultures lead to poor customer and business outcomes, assurance over your organisation’s culture is therefore undoubtedly required.
It is often felt that culture is intangible and therefore there is little an organisation can do to create or amend culture. However, the culture of an organisation should not be an accident of who works there, it should be owned and managed by leaders across the organisation. Aspects of cultures can be created or changed, through a structured programme of integrated interventions which are then monitored.
The challenge is to make the intangible, tangible and measurable. For example, the FCA will be looking for financial services firms to develop, proactively identify, ensure and demonstrate culture.
The attached report considers in more detail how financial services firms can go about:
- Understanding, maintaining and changing culture
- Understanding the drivers of culture
- Auditing culture
For a more detailed analysis of auditing culture in financial services firms, download the accompanying report.