Culture can no longer be ignored. With SM&CR and culture so intrinsically linked, savvy firms are thinking again about how healthy their culture truly is.
Until now, spending on culture has been deemed a ‘nice to have’, an optional spend that many budgets don’t have room for. But as you’re working hard to comply with SM&CR, it’s time for you to take a look at culture too. You’ll find it easier to nail compliance, promote a healthier workplace, and it’ll actually save you time and money in the long run.
Why culture matters
SM&CR, with its focus on the conduct and fitness of key staff, provides the building blocks for a healthy culture. But while SM&CR can’t directly control the decisions you make or how you behave, your culture can.
All too often we hear of the FCA taking action against firms because of some major corporate failure. At the root of these failures is usually a poor culture. By focusing on culture alongside SM&CR you have the potential to tackle the behaviour of your staff, reducing the risk of breaching regulatory rules or causing customer harm.
Where to focus your budget
The FCA has made it very clear that it expects SM&CR to be instilled within your organisational culture – that it becomes ‘business as usual’. Conducting a culture and conduct risk assessment alongside the new regime is a great starting point to get you on your way. It’ll identify areas of weakness you’ll need to address to make sure SM&CR is properly embedded and that your culture supports it.
Consider taking a look at:
- Values and purpose – Your company values and purpose are the foundation of a good organisational culture. Your staff should know what your business stands for and understand how this is delivered in practice. You should map your values to the Conduct Rules to build a link between the new regime and culture.
- Tone from the top – As a senior manager at the helm of your firm, you’re expected to step up and take responsibility for embedding SM&CR into your culture. As well as acting as a role model, you have the authority to set a culture of accountability through the governance and conduct risk framework. MI should allow you to make decisions about the influence of your culture on customer outcomes.
- Middle management – The conduct of people in middle management can be the biggest influencer of behaviours in the lower layers of a business. Without proper management, it can easily dilute the message and undermine efforts to embed a healthy culture. The good news is that the reverse is also true. And as middle management fall under the SM&CR, improved conduct will have a huge impact on your ability to set and manage a healthy culture.
- Reward and recruitment – These are the underlying policies that shape your culture – for good or bad. Make following the Conduct Rules part of your reward and incentive schemes. This should trickle right through to your recruitment policies, making sure you employ the right people who share your firm values and embrace the Conduct Rules.
Remember, your firm is different to everyone else’s. It’s unique in its scale, structure and business model. So while the points above are a great starting point, don’t be tempted by an ‘off the shelf’ approach.
Fortunately our culture and conduct risk assessments are bespoke and tailored to your business. We’re experts in culture, and our extensive SM&CR knowledge means everything is considered within the wider regulatory context.