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FCA Discussion: Driving Purposeful Cultures

Driving Purposeful Cultures

9th March 2020

On Thursday, 5th March 2020, the Financial Conduct Authority published a Discussion Paper (DP20/1) relating to driving purposeful cultures which comprises a set of essays from industry leaders, professional bodies and culture experts which are intended to help firms embed purposeful cultures.

- DP20/1: Transforming culture in Financial Services – Driving Purposeful Cultures

The essays do not represent the FCA’s views per se, however the regulator wishes to share the range of insights and highlight the importance of this particular subject.

DP20/1 makes the case for healthy purposeful cultures in firms, leading to good outcomes for their customers, employees and investors, with ‘purpose’ being described by the FCA as “what a firm and its employees is trying to achieve – the definition of what constitutes success”.

Cultural change has been high on the regulatory agenda for some years and transforming culture in financial service continues to be a priority for the FCA, as it should be for firms also.

In publishing this paper, the regulator informs that it is tackling this in a variety of ways, including making diversity and inclusion “the norm” and eliminating sexual harassment and other unhealthy practices from the workplace.

However, the regulator also recognises that there are barriers to creating and maintaining healthy, purposeful cultures – including fear of shareholders’ short-term profit expectations as well as fear of the FCA itself.

Mr Jonathan Davidson of the FCA (Executive Director of Supervision: Retail & Authorisations) said: “The purpose of a firm sits at the heart of its business model, strategy and culture. Unhealthy cultures and purpose have been at the root cause of too many mis-selling and other conduct scandals in financial services. I want to see strong leadership creating purposeful cultures where it is safe to speak up and diversity is encouraged and listened to.”

A Healthy Purposeful Culture: Aims

Embedding a healthy purposeful culture within Firms, should, hopefully lead to better outcomes for consumers and markets with healthy and sustainable returns for shareholders. It is believed it should also lead to healthier and less stressful environments for employees, as well as a reduction in increasingly concerning mental health issues.

It is a firm’s own responsibility to define their individual purpose and, as with culture, the regulator does not dictate what this should be, yet helps to guide firm’s on common elements of a healthy culture, such as:

• A meaningful purpose
• An inclusive environment where it feels safe to ‘speak up’
• Effective leadership and governance
• Employees that  have the necessary capabilities and are motivated by appropriate incentives.

The FCA notes, that cultural transformation is difficult, even with strong leadership, as it takes time and consistency, however even small changes can end up making a big difference.

Next Steps:

Firms should reflect upon the essays provided within the discussion paper and use these as inspiration to see if they can work towards creating a more purposeful culture within their own organisations.

Whilst this is a discussion paper and those interested are welcome to submit their feedback, the regulator is not requesting any formal feedback.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.