Employees feeling like they are able to challenge their bosses is vital for a healthy culture and could even stop firms from failing, the FCA has said.
Sheree Howard, the regulator’s director of risk and compliance oversight, acknowledged that this approach is not always easy but is the right thing to do.
She also said it is important to look beyond your own company to see where outside risks could be coming from.
Speaking at an event last week, Howard said: “For a healthy, purposeful culture to thrive, we have to create an atmosphere of fearlessness, not fear.
“One thing I would implore you all to ask yourselves is: what are you frightened of asking your organisation and why? There should be no ‘no-go’ zones.
“And before you think ‘easy for the regulator to say’ – please remember I have sat where you are and faced a number of situations where I have had to go against the grain – it is not easy, but it is the right thing to do.”
She added: “Being able to challenge – even the boss – is crucial. Employees should feel free to speak up and even more importantly, bosses should feel compelled to listen up.
“We can all point to examples of where this could have avoided fall outs or even firm failures.
“A culture that tolerates nonfinancial misconduct is unlikely to be one in which people feel able to speak up and challenge decisions.
“Nor is it one in which they will have faith that concerns will be considered independently and fairly.
Employees should feel free to speak up and even more importantly, bosses should feel compelled to listen upSheree Howard, FCA“It also raises questions about decision making and risk management in the firm.”
Howard said there are instances where non-financial misconduct has led to financial consequences.
She went on to say that organisations lacking diversity are at a “much greater risk” of not having a healthy culture.
In September the FCA launched a consultation with the Prudential Regulation Authority (PRA) which includes measures to improve diversity in financial services.
It would involve firms having to report diversity employee data each year.
Concluding her speech, Howard said: “We know times are tough and that you are all under ever greater pressure but right now, is exactly the time to maintain and to resist any temptation to lessen standards or let things slide.
“Good risk management protects profitability. Do what you can to infuse your culture with fearlessness. Take heed of your culture of diversity, equity and inclusion.
“Closely scrutinise your three lines of defence to ensure they are separate but cohesive – for that is what we are doing.”
The speech was made on November 15 at the XLOD Global London conference.
tara.o'connor@ft.com
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