This post by Dave Curran originally appeared on Thomson Reuters’ Legal Executive Institute on July 2018.
LONDON — Culture is at the top of the agenda for many financial institutions — particularly with regard to risk. And this comes at a time when the idea of corporate culture is itself undergoing a vivid transformation, fueled by management’s growing realization of the importance of a healthy and inclusive culture in maintaining a successful company.
To that end, more than 70 senior leaders gathered last month at Thomson Reuters’ offices in Canary Wharf for a lively panel session, entitled, Bank Culture Reform and Behavioural Science. (The panel was moderated by David Curran, Global Director, Risk & Compliance at Thomson Reuters. Curran has led five such programs in both New York and London.)
The panel included industry experts in behavioural risk and corporate governance in addition to several leaders from top financial institutions. From the banks, we heard fromWieke Scholten, Head of Audit for behavioural risk at RBS; Moritz Rӧmer, Supervisor in behaviour and culture at Dutch Bank; and Orlando Ruiz Fernandez, Technical Specialist in governance, system and controls at the Bank of England. Offering a different, data-driven viewpoint was Alex Viall, Head of Regulatory Intelligence at Behavox, an analytics company that interprets employee data to understand the behaviour of an organisation.
Viall set the context by emphasising the risk of exposure present in today’s interconnected society — cultural failings can be exposed ruthlessly through digital media, and “it can be immediate and devastating, as well as very embarrassing.”
The discussion in London echoed conclusions from two panels held at a Bank Culture event this past April, highlighting the difficulty of grappling successfully with “bank-wide” culture. Instead, as the previous panels noted, the development of subcultures becomes crucial. In these smaller, localized subcultures —”climates”, as Scholten of RBS put it — it leads to specific learnings that are better actionable to change behaviours effectively. Before joining RBS, Scholten for example assessed local climates of trading desks, using quantitative and qualitative data to identify those desks with high-risk cultures.
However, data can only tell half the story; and Dutch Bank’s Rӧmer preferred to talk about “describing” culture, rather than “measuring” it, adding that qualitative judgements are vital in forming a complete picture.As the Bank of England’s Fernandez agreed, pointing out that data “can provide a pre-risk assessment, but it’s what you decide to do with that data that is important.”
In that regard, panel attendees noted the value of green flags — not just red flags. Both will trigger responses in employee behaviour, and the end-goal must be to actually change that behaviour, rather than just draw attention to it. Banks have become more “behaviour aware,” and employees have accepted a certain degree of monitoring and surveillance that occurs in the workplace. However, panellists noted, employees’ acceptance of this must be underpinned by a sense of organisational fairness in how the bank responds to the data it gathers.
The panellists advised that behavioural change must be driven at all levels. That means that while tone at the top is important and new starters can be trained the right way at the outset, it’s the middle management that must demonstrate their buy-in for cultural change to succeed. All too often, Viall cautioned, a “perma-frost” can form, where individuals are siloed to value profit over proper behaviour and culture. The right key influencers can ensure that cultural change takes effect throughout a company’s subcultures.
Scholten helped the session to finish on a positive note, reminding attendees that “people, for the most part, go to work with the intention of doing the right thing.”
As we move forward, it’s increasingly obvious that cultural considerations are not a separate category to be tackled alongside client-facing work. Through training and incentivization, financial institutions can and must make those behaviours a key part of banks’ client-facing work — because a healthy culture is guaranteed to benefit the client.