Culture and Conduct Risk Considerations – An Ongoing Journey

Nic Dent

Nic Dent

Nic is highly experienced in implementing people centric compliance and performance management solutions. Aside from his responsibilities within the market and product strategy function, Nic spends the good share of his time advising clients through the pre-sales stages and in project to help firms embed software implementations that deliver their requirements and deliver regulatory change.

How interesting it is to learn that firms seem to be so confident about justifying their Conduct and Culture journeys currently. But would the regulator have a similar view about the progress firms are making and how positively would they view the actual impact of culture within the market as a key driver, and potential mitigant, of conduct risk at this moment in time?

During a recent webinar, Julie Pardy (Director of Regulation and Client Engagement here at Worksmart) questioned our audience about how confident firms felt if required to describe their Conduct and Culture journey to the regulator. This alongside asking firms what tools they use to measure culture too.

The breakdown of the results of these two polls you can see from the infographics below; but it seems that majority of firms are fairly content with their current approach along with their reliance on existing KPIs and employee surveys.

Is that position somewhat risky?

Evidently, the regulator is becoming more data led, with the new management team driving through that 3-year plan at the FCA; £120m is earmarked for their own data development projects, alongside building a team of leading data scientists to help slice and dice information in search of emerging risks. Surely, the industry itself seems slightly out of step with these levels of investment in technology and data analytics, that being true where culture and conduct are concerned at least.

As one example of this inconsistency. Firms’ current reliance on annual staff surveys (see infographic below) does indeed ‘tick a box’, but does it provide accurate or meaningful insight? Put simply, if basic surveys lack relevance, or employees find questions annoying, or too personal, they’re less likely to answer honestly, if at all. Some of these tools certainly allow for easy statics and data analysis, but does working within limitations such as the oversimplified (“agree” or “disagree”) declaration statements that are very typical of such surveys provide any meaningful or accurate understanding when compared to open-ended questions – which are much more likely to provide a richer and more expressive insight?

Our colleagues at Elephants Don’t Forget are technology providers that certainly advocate moving beyond simple annual check-ups in favour of implementing more ‘pulse type’ survey tactics, in a personalised and targeted way, to help measure the overall mood of your organisation in real time.

Cultures are built by people interacting and communicating with each other, by learning norms and accepted behaviours through observation and social cues. Culture is often described as “the way we do things around here”, but as we enter what looks like another period of home working, driven by this next phase of the pandemic, what happens when our idea of “here” is all about home working and a completely dispersed and disconnected workforce?

Moreover, many firms are moving towards a new normal where a more dispersed working environment is likely to continue beyond the pandemic too. If that’s you, is your approach for your Culture and Conduct journey evolving also?

Are firms at risk too of forgetting that Culture and Conduct is at the heart of the Senior Managers and Certification Regime (SM&CR) which does require that ongoing commitment from the firm leadership if it is to be a success. Rather than being seen as merely another process that has long since been delegated to the team who manage the records and who are charged with ensuring compliance, SM&CR is all about cultural change, not just compliance, and it remains the expectation of the regulator for Senior Managers to lead and do the right thing.

All these issues bring with them difficulties and risks. These are uncharted and tricky waters to navigate. However, there are also great opportunities, and these challenges can be met where leaders focus on how to run their businesses more effectively and efficiently, helped considerably where they retain a continuing focus on culture to underpin that ongoing journey.

Firms that get this wrong run the risk of becoming increasingly out of step with the regulatory environment and outpaced by their immediate competition too; poor conduct, low staff morale and ultimately, weak future performance are all tangible risks. However, those that find ways to encourage consistent and intended behaviours have the chance to build business models and resilient cultures that adapt to these evolving circumstances with positive outcomes for customers, employees, and investors alike.

During the webinar, Julie posed a question to herself: “Is regulatory compliance a taxation spend or a business enabler?”

Her considered response?… “Firms can choose to comply just because they have no choice, which often risks the tick box approach that the regulator is keen to avoid. Or firms can choose to leverage the regulatory initiatives as business enablers, drawing benefit that can enhance the customer experience, enhance the firm and benefit their employees too.”

If we reconsider the regulators plans to continue to extend their reach into technology and improvements in data analytics, and how these plans continue to sharpen their focus on the culture of financial services. Those firms who choose to be less tech enabled and continue with their reliance on manual or human led systems and controls risk becoming increasing out of step in the months and years to come. Firms owe it to themselves to understand their options and specifically, why the RegTech sector is moving forward at such a pace.

For our part and as a supplier of RegTech solutions, we see an opening of a cultural window every time we engage with a client here at Worksmart, benefiting from an insight into why firms choose to implement RegTech. Increasingly, firms are pursuing tech solutions for their own advantage; meeting their regulatory requirements at the same time as helping manage and mitigate risk and enjoying much greater levels of operational efficiency. Clients recognise too, that RegTech can directly influence culture simply by virtue of allowing people to do their jobs better through provision of suitable tools.

Alongside SM&CR then, we can indeed regard Culture and Conduct Risk considerations as an ongoing journey and not just a ‘one and done’ type challenge. But one that promises tangible returns and benefits for the firm as a by-product of compliance, good practice, and an effective approach.
Like to know more about how we can support you in your cultural journey?… reach out to the team at

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