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Introduction

The Financial Conduct Authority (FCA) Discussion Paper 18/2 Transforming Culture in Financial Services https://www.fca.org.uk/publications/discussion-papers/dp18-2-transforming-culture-financial-services identified #leadership as one of the four key drivers of #culture and #governance in financial services firms.

The paper offers actionable insights for financial services leaders and practitioners to consider how they effect change in their organisations.

Two fundamental concepts underpin the FCA’s thinking about culture and regulation:

  • Regulation has to hold the individual as well as the firm to account; and
  • Leaders can manage culture, even if they can’t measure it very well

This approach is embedded in the Accountability Regime which aims to hold firm’s leadership to account firstly for their own behaviour and secondly, for taking reasonable steps to manage the #behaviour of those in their areas of responsibility.

The FCA recognise that leadership plays a significant role in driving forward healthy culture change.

Give the complexity of a subject like culture, what actions can leaders take in a digital age to bring about the type and pace of change the FCA expects to see?

Leading culture change

The #FCA, alongside industry partners, have stated they intend to explore questions such as how to raise management of ‘culture’ as a #leadership discipline to the level of rigour and importance as ‘strategic planning’ and ‘risk management’.

This raises an important question as to what skills are required of leadership to promote and manage culture?

By way of example, Essay 4.1 from Credit Suisse in Discussion Paper 18/2 sets out the qualities of an effective leader. These include:

  • Self-awareness
  • Authenticity
  • Principled pragmatism
  • Consistency

Market failures and the drivers of misconduct often relate to leadership and ‘tone from the top’. Whilst this may be correct, such qualitative and evolving behaviours are unlikely to be influenced by precise regulatory solutions. Board effectiveness reviews are already common practice and focus on behaviours with respect to leadership, decision-making and #communication.

Leadership style

Perhaps the starting point is to consider the leadership style adopted by individuals, rather than the Executive Committee? To be successful, leadership involvement cannot stop with the individuals participating in a monthly committee.

Firms need to recruit the right people in the first place, but there is also a more enduring point that focuses on what should be expected of leaders on a day-to-day basis. At its most basic, this involves providing ongoing and visible commitment and support. Beyond these ad hoc interventions, how can the typical Executive demonstrate ongoing, visible commitment to culture change that outlasts a moment in time?

Purposeful leadership

For leadership teams to embed organisational strategies and individual behaviours that restore public faith in financial services and build sustainable businesses, the commitment needs to be visible and enduring.

The LinkedIn Executive Playbook https://business.linkedin.com/content/dam/me/business/en-us/marketing-solutions/resources/pdfs/linkedin-executive-playbook-2018.pdf makes some interesting observations:

  • Today’s top performing leaders engage online
  • The platform enables resilient and direct channels of communication
  • An opportunity to remain top of mind with your target audience
  • Daily interaction allows users to consume and share content from leaders and companies
  • A sense of proximity is achieved at a low cost and with low time commitment

Final thoughts

Given the ability of LinkedIn to:

  • Develop focused, informed and trusted relationships; and
  • Communicate personalised and targeted messages to your audience

does this not raise a question as to why so few Executives in financial services proactively use LinkedIn to visibly demonstrate their commitment to culture change within their firms?

Darren provides Enterprise Risk Management advisory services to the Insurance and Investment Management sectors.  Helping Board and C-level executives address strategic challenges, by delivering solutions that create Enterprise Value and improve business performance.

Darren is an experienced executive with over 20 years’ global experience with multinational companies, including Chief Risk Officer reporting to the Board.

Darren is an Honorary Visiting Fellow of the Digital Leadership Research Centre, Cass Business School where he also holds an Executive MBA.   Darren is a Certified Fellow of the Institute of Risk Management (CFIRM) and Chartered Insurance Risk Manager (ACII) of the Chartered Insurance Institute.


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