Search

The problem with culture starts with MI

According to the FCA, culture audits, culture prints, and culture maps are precisely where the problem with culture starts. FCA considers that as soon as we attempt to wrap metrics around culture or conduct, we are missing the point because culture is dynamic, intangible and by its nature, qualitative.


Where does that leave us when FCA places so much emphasis on conduct and culture on the one hand, and on audit trails and management information on the other?


Should you tear up your conduct metrics?

This doesn’t mean that you should tear up your conduct metric deck as what you are reporting is undoubtedly measuring aspects of your company’s culture. It just won’t be getting to the heart of conduct and what FCA means by culture.


Right from the beginning when the old FSA was developing the premise around conduct and culture, we were not looking at black letter regulation and whether firms could do something. Our focus back then was on if firms got the question of should they. Answering that question shouldn’t result in something tangible you point to such as the conduct MI deck after all, isn’t MI decks where the TCF initiative lost its way.


How should you approach conduct and culture?

What it should do is enable you to consider what conduct and culture means for your business and how that conduct and culture should manifest itself in how people behave when they are working in your company. Very few businesses are about the bottom line at all costs because there will be a cost that is too great to bear. The question is can you define what is too great.


In the Worldspreads case the CEO was deliberately concealing information from investors in attempt to save his business. This is an extreme example that is undoubtedly on your list of costs that are too great for the business to bear. Use it as a starting point of clearly wrong and work back.


Consider read across

Consider examples that relate to your operations teams and how they make sure they are implementing what your clients have been told. How are your complaint handlers guided about striking the balance between resolving issues for clients and accepting liability. At the other end of the spectrum is your receptionist: is it ok that he claims someone is not available when they are?


If you consider a simple example where your receptionist tells a white lie about someone’s availability. The inference is there is an internal tolerance of white lies within your business. If you read that tolerance across to other areas of the business, should your complaint handler make a white lie when speaking with a client about resolving an issue affecting the firm’s liability. Would your dealers tell white lies to clients about how they are executing client orders. Probably not. Are you happy risking your business reputation on probably.


It doesn't have to be a huge burden

Now you may be starting to feel you could be facing a big time-consuming dialogue with all your people. To some extent you might be right but this is not a one off event, it needs to be something that is reinforced in everything that everyone in the business does and says.


When you start out it will be a conscious effort to find the opportunity and the words to use, but as time goes on you will find yourself sharing examples of issues that have been flagged and resolved because that individual in operations felt comfortable speaking up about it, and your management team were happy to know about and resolve.


Consider leveraging SMCR

If your business is starting to implement the SMCR then you will find plenty of opportunities to reinforce the conduct and culture that you expect of your people and business. This can start with simple things like training on the conduct rules, right through to coaching your SMF holders on how they document their reasonable steps and agree how the handoff to one another within the senior management team.


SMCR is a regime that has a bit of process and black letter law to follow but is predominately about culture and conduct change. We provide ready-made training packs, templates, and guides to help with your SMCR implementation. We also support new SMFs and Certified Persons and help them understand what they are taking on and how to get their responsibilities to work commercially for the firm as much as how to protect themselves personally.

27 views
How to Guide: MiFID II Transaction Reporting

How to Guide: MiFID II Transaction Reporting

SMCR Checklist

SMCR Checklist

Training on PRA & FCA outsourcing

Training on PRA & FCA outsourcing

Bribery and Corruption Risk Assessment

Bribery and Corruption Risk Assessment

Training Pack: Suspicious Transaction Order Reporting (STOR)

Training Pack: Suspicious Transaction Order Reporting (STOR)

Brexit Substituted Compliance Inventory

Brexit Substituted Compliance Inventory

Conflicts of Interest Register Template

Conflicts of Interest Register Template

UK Financial Crime Inventory

UK Financial Crime Inventory

Fit and Proper Assessment Template

Fit and Proper Assessment Template

UK Public General Acts Inventory

UK Public General Acts Inventory

Reasonable Steps Templates

Reasonable Steps Templates

PRA & FCA Outsourcing Checklist

PRA & FCA Outsourcing Checklist

Need some compliance advice?

Want to check best practice or request advice on your approach. Need technical support with your audit or monitoring review? Request a private consultation by video conference.

 

We offer 45 minute sessions by video conference.

regulatory consulting companies

fca compliance procedures

financial services compliance consultants

regulatory compliance consulting firms

regulatory consulting companies     fca compliance procedures     financial services compliance consultants     regulatory compliance consulting firms  skilled person

©2020 by Leaman Crellin Limited