FCA- “Culture is at the heart of how we supervise firms”

FCA Executive Director Sheldon Mills recently delivered a speech at the Investment Association covering a disparate range of subjects- corporate culture, diversity and climate change. The speech emphasised the centrality of culture in the FCA’s overall assessment:

“In almost every instance of poor conduct, deep-set cultural issues have been present. We believe firms with healthy cultures are less prone to misconduct.”

While the FCA emphasises that it does not take a prescriptive approach to culture, its assessment does include tangible metrics including the firm’s application of the SMCR. Mr Mills made reference to the pandemic “New Normal”, highlighting both the risks and opportunities afforded by the emerging hybrid working model.

“There are clearly huge potential benefits to staff wellbeing and productivity. And, in the right circumstances, it can promote better inclusion. It can also enable leaders to be more visible and connected to their staff. But it can also lead to isolation, fewer avenues to speak up, and a lack of control and oversight….Through our range of supervisory tools, we will monitor how firms continue to adapt to the new normal. We look for assurance that leaders identify and mitigate the risks that emerge.”

The FCA is clearly correct to place corporate culture at the heart of its supervisory engagement process. However, it recognises that culture is hard to both define and measure. While it is vital for firms to nurture a healthy, productive and purposeful culture in all areas, it is particularly important to evidence compliance in the few areas that provide tangible cultural “metrics”.

The SMCR requires both compliance and detailed evidence of compliance efforts, failure to comply with a relatively precise metric can only raise questions as to  possible failure in other more Regulatory subjective areas.

SM&CR compliance may seem initially daunting and continually burdensome. As in most areas, the task is best completed with the correct tool for the job. Corterum allows you to easily and efficiently manage your obligations under the Regime. It really is SM&CR compliance, made simple. 

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