What does success look like in financial services?

Any leader worth their salt will tell you that a business needs to be profitable and financially stable. They’re not wrong. But the market can be cruel – it only takes an unexpected event or particularly volatile conditions to slow profits. When this happens, the cracks will emerge and non-financial risks start to creep through.

Ultimately, where profit is prioritised over customer care, staff will be pushed towards poor behaviours and bring about poor outcomes as a result. And eventually you can expect regulatory scrutiny to follow, even if it’s years later.

On the other hand, firms that place as much value on culture and governance as they do the bottom line will often see higher staff engagement, more customer loyalty and stronger compliance. All the key ingredients for commercial success with real staying power, even in the most turbulent of times. And in the year since the Royal Commission’s final report was published, regulators, legislators and forward-thinking business are realising this too.

Since then, we’ve seen a new Banking Code of Practice that promises better customer outcomes, and the BEAR regime giving APRA the power to dismiss senior execs who don’t take their obligations around conduct seriously. What’s more, under FAR proposals, executives who flout the accountability rules could face civil penalties of up to A$1m.

These measures are intended to force businesses – and those that run them – to start properly considering non-financial risk, misconduct and the cultural drivers of it. And while there’s debate in the industry about the best way to do that, one thing is clear: the push for cultural reform isn’t going away.

We know that shaping your internal culture is easier said than done. A culture is usually deeply rooted in years of repeated, and often encouraged, behaviours. Couple that with the fact that no two financial services firms will be culturally identical, and it can be difficult to know where to start. Here’s a couple of key points to start from:

How well do you know your culture?

With APRA upping its supervisory capabilities on culture, it’d be wise to start assessing yours so you can root out any cultural problems, ensuring they don’t materialise into serious misconduct. That means digging deep, getting under the skin of your business and dealing with any problems that might arise.

A helpful starting point could be to understand how well your wider workforce understand your culture. You’ll probably have established company values and a formally defined purpose. But if your employees struggle to articulate what your business stands for or what this looks like in practice, then it’s likely your culture isn’t as deeply embedded across your organisation as it needs to be.

This insight will give you a good baseline measure for how strong your culture is and the work that needs to be done.

Is everyone responsible?

As a senior manager, the BEAR regime makes you accountable for conduct within your organisation. And while a positive culture should absolutely be promoted by senior managers, it is every individual’s responsibility to maintain this throughout their work and across the company.

As well as modelling good behaviour, you have the authority to create a culture of accountability across all levels of your organisation. After all, the delivery of good customer outcomes should be a top priority for all employees and one of the main measures used to assess performance.

Can you evidence this?

Over the years, UK banks have had to shoulder multi-million pound fines as a result of cultural failings, such as where incentives schemes directly encourage widespread misspelling.

It’s likely that Australian regulators will look to the UK when setting the direction of travel, so expect cultural supervision to be ramped up. Smart firms see the value of getting ahead, and are getting all their evidence lined up ready for regulatory scrutiny. For success in this area your management information must provide the right data to evidence that your culture is present and being monitored and actioned across the business.

Ultimately, where profit is prioritised over customer care, staff will be pushed towards poor behaviours and bring about poor outcomes as a result

Need help assessing your culture?

Our Culture & Conduct Risk Assessment will unearth everything you need to know about your organisational culture, providing independent assurance and insightful MI for extra rigour.

Download our infographic to see how we do it.