Diversity and Inclusion  

FCA to scrutinise diversity in culture crackdown

FCA to scrutinise diversity in culture crackdown

The Financial Conduct Authority has warned firms that fail to support a good business culture can expect "increased supervisory scrutiny" from the regulator. 

It comes as the watchdog today (March 5) committed to ensuring the "transformation" of culture in the financial services remained a priority for the FCA, something FTAdviser has heavily campaigned for in recent months

The regulator published a series of industry papers on its website, heralding the start of a "much larger conversation" surrounding "purposeful cultures" within the financial services sector.

Whilst the FCA admitted a firm's individual purpose was its own responsibility, for which the regulator promised not to prescribe a "one-size-fits-all" solution, it said it wanted companies to realise the benefits of a healthy culture.

Jonathan Davidson, executive director of supervision in retail and authorisations at the FCA, said the purpose of a firm sat at the "heart of its business model, strategy and culture" and played a "fundamental role" in reducing potential harm.

Mr Davidson said: "By sharing a range of insights from industry leaders and cultural experts, we hope this will help firms to adopt purposeful cultures.

"Culture transformation takes time and consistency, but small changes can make a big difference.

"From a supervisory perspective, a focus on purpose and how it manifests is, and will remain, front and centre.

"And if a firm’s purpose and associated business model is contributing to, or exacerbating, the risk of potential harm, then firms can expect increased supervisory scrutiny."

Mr Davidson also warned improved cultures within firms was not just an FCA objective, but also an "increasingly broader societal expectation". 

The FCA director said, in addition to regulatory consequences, consumers would begin to "vote with their feet" where firms acted "purely and selfishly for profit".

He warned: "Where trust arrives on foot, it leaves on horseback at a gallop." 

The regulator also warned employees may find themselves wanting to work for the competitor with a "purpose that resonates with their own". 

Mr Davidson added: "I hope that everyone who reads these essays will be inspired to take at least one idea back to their organisation to try for themselves and take a step towards creating more purposeful cultures in financial services."

Sian Fisher, chief executive of the Chartered Insurance Institute, said: "Insurance needs to keep up with these changes to remain relevant.

"The profession can do this by providing a service more angled towards helping people and organisations become more resilient as their circumstances change, through a blend of services that go beyond the traditional products.

"For the profession to thrive in the modern world it is vital that it is seen to be clearly aligned with delivering what the general public needs and ensuring they are protected against the risks they face on a daily basis."