In this series of five blogs I’m seeking to explain why I believe culture should matter more than compliance to professional firms and how cultural change can transform even the most austere of businesses.
You might reasonably think culture might clash most when it comes to governance – which is surely about running a firm to meet the requirement of regulators. Not so.
The Financial Conduct Authority (FCA) is often accused of failing to communicate clearly and put meat on the bones on what it expects to see from firms.
Yet when it comes to the Consumer Duty, introduced in July 2023 to drive up care standards, it’s incredibly clear cut. Forget about being an authorised firm and focus on providing the best service you can.
In other words, don’t get hung up on the FCA’s expectations and meeting regulations, shape your own governance framework so it is fit for purpose and differs to the firm next door.
Systems and controls, which include good governance, provide evidence of a healthy and authentic culture in any firm whether it is authorised by the FCA or not.
Yet it is all too easy to get so bogged down in the devil of the detail that you can’t see the wood for the trees.
My advice is simple – to view the bigger picture and to gain fresh perspective, step outside your firm and look outside in.
Despite the technicalities of the FCA’s requirements, good governance can often come from having the right people in the right roles.
Let’s start with your board. Who are the actual people leading the business? Why are they there? Are they the best – or at least the right – people?
Is your leadership truly diverse by nature? Do they lead with an inclusive mindset and do they have the right range of knowledge, skill and behaviour to lead an FCA authorised firm in 2023?
This can sometimes be tricky as you may need to evaluate the contribution of long-standing colleagues you have worked with for many years. That doesn’t prevent them from being square pegs in round holes.
There are other areas of governance you can refresh too – such as the board’s terms of reference – that’s if you even have one.
When was it last examined by the board to ensure that it remains fit for purpose? Indeed, how does the board use it to test and measure performance of the board and functioning of the firm?
Does the firm have non-executive board members? If so, are they truly independent and is there evidence they test and challenge the leaders of the business sufficiently on a frequent basis? If you don’t have a non-executive on board, who carries out your independent scrutiny?
What about your firm’s board meetings? Who is asked to provide input and how far in advance of meetings is the board pack circulated to attendees? If it is the day before you may need to think again.
What information is provided and what does it look like? How often is it reviewed and what is contained within the board’s standing agenda? How do you know that the minutes evidence the right type of scrutiny and detail needed?
If board meetings have become a mere rubber-stamping exercise, how can you refresh them to encounter a wider, more vibrant range of input?
Then there’s acting upon the items discussed – the literal direction of the firm. How does the board track assigned actions and ensure they are SMART – Specific, Measurable, Achievable, Relevant and Time-Bound?
How about the risk of constantly kicking cans down the road? How do you rate ‘carried forward’ actions? How frequently are items simply sidelined because the board didn’t consider them important enough – or because there wasn’t sufficient time to cover them in adequate detail?
These items, and many more, need to be reviewed to improve the governance of your firm. They are key indicators of the health of your firm’s internal culture, which can wither on the vine unless it is regularly refreshed and revived.
If you would like to leave a comment, observation, pose a question or request further information about how to embed a good culture into your business feel free to contact me.
OTHER BLOGS IN THIS SERIES
Driving cultural change – the case for culture
Driving cultural change – leadership
Driving cultural change – purpose
Driving cultural change – people
Psychological safety – is it for real?
ABOUT THE AUTHOR
Julie Ampadu is the current chair of The Association of Professional Compliance Consultants (APCC), a member of the Reporting & Data Standards Transformation Board for the Bank of England (BoE) and Financial Conduct Authority (FCA) as a representative of the APCC and the founder of Chameleon Compliance Ltd and Business Chameleon Ltd.