Why is Culture so important?
Improving culture and governance in regulated firms has always been a major priority for the FCA, but what does it mean and how does it benefit consumers?
The Senior Managers and Certification Regime (SM&CR) came into force for FCA solo-regulated firms in December 2019. The aim of this new regime is to encourage a culture of accountability, which in turn reduces harm to consumers.
The rules apply to the majority of personnel working in a regulated business. They set minimum behavioural standards which must be observed and require Senior Managers to clearly demonstrate and understand where the responsibility for each business function lies.
SM&CR creates a formal link between the decision-making behaviours of individuals at all levels of management and the overall conduct of the firm. When a firm is discussing its strategic outlook, they may ask themselves, “where are we now?”, “where do we want to be?” and “how will we get there?” As a result, therefore, culture and strategy can be interlinked. However, there must be a clear rationale and alignment between strategy, culture and values.
Culture is different for each firm. There is not a “one size fits all “model, and the FCA does not prescribe what a firm’s culture should be. They do, however, define culture as “habitual behaviours and mindsets that characterise an organisation.” Culture arguably can be the most beneficial asset a business can have; it can complement good client outcomes and build sustainable growth.
It is widely accepted that “bad” culture has been a major root cause of conduct failure, subsequently causing harm to both consumers and markets. For organisations to be sustainable and successful, they must be seen as responsible.
Good culture is often marked by specific values, and in the case of Thorntons Investments these are – Driven, Dependable, Dynamic and Diligent. These values are not only displayed on our “motivational wall” in the staff area but are firmly embedded in the behaviours of all staff, starting at Board level and filtering down throughout the organisation.
We also champion good culture by reinforcing positive behaviour and “doing the right thing” ahead of commercial business interests. We encourage meaningful discussions and open opportunities to challenge decisions. Some examples of this positive reinforcement are demonstrated throughout our company, from ongoing monitoring of client services and outcomes, supporting our staff in their professional development, reviewing our performance in quarterly “town hall” business updates, to supporting local charities through our planned social events.
Therefore, to increase consumer confidence, the rules must be placed at the heart of all organisations, thus reinforcing positive culture, and doing the right thing for clients.