Would your firm’s policy on diversity and inclusion stand up to scrutiny?
Anyone in the world of insurance who still thinks they can afford to ignore or put off addressing issues around diversity and inclusion could be in for a rude awakening.
Culture is a big deal for the FCA. The regulator has been making it increasingly clear that it will soon be following up the many words it has devoted to issues like diversity and inclusion (D&I) with action.
Extended to FCA solo-regulated firms in December 2019, the Senior Managers and Certification Regime (SM&CR) gives the FCA the power to intervene where it believes unfair treatment, discrimination, bullying and harassment or other inappropriate conduct has taken place - and penalise individual leaders. Its aim is to increase individual accountability and drive healthy cultures within firms.
The harsh glare under which the Metropolitan Police has been exposed, in the wake of the Sarah Everard case over its failure to tackle a culture of misogyny, provides a vivid illustration of how badly things can go wrong - and how uncomfortable the resulting scrutiny can be for the organisation concerned.
A recent speech by the FCA’s executive director for consumers and competition, Sheldon Mills made clear the regulator’s view that financial services firms still have a lot of ground to make up on D&I and culture issues generally. ‘Firms with healthy cultures,’ Mills made clear, ‘are less prone to misconduct. The clear implication, of course - and this is a core assumption for the FCA - is that those with less healthy cultures are more prone to misconduct and have arguably created a fertile environment for misconduct and its resultant harms.
Stressing the regulator’s willingness to take action and set examples, Mills emphasised that, ‘Lasting change will only come from firms looking at their own cultures and taking action.’ Amongst other initiatives designed to shine a fiercer spotlight on D&I, it now looks likely the FCA’s 5 Conduct Questions (5CQ) will be expanded to include a sixth: D&I. This clearly indicates how much of a priority the issue is for the regulator now.
HR professionals have a crucial role to play in grasping the D&I bull by the horns. It’s vitally important we all take stock and ask ourselves: ‘Is our diversity and inclusion policy fit for purpose? Is it properly aligned with the FCA directive? Does it set out culturally appropriate expectations and responsibilities? Will it pass muster if and when the spotlight falls on us?’
Done right, D&I can be a real source of strength for a firm. It can help attract and retain high-calibre staff, and help a firm respond and adapt effectively to fast-changing customer needs and expectations. A culture within which all employees feel accepted and able to speak freely, can help prevent incidences of misconduct.
But, without an appropriately conceived and implemented D&I policy in place, issues can all too easily arise - potentially resulting in whistle-blowing that can put a firm in an uncomfortable and potentially costly relationship with aggrieved staff members and attract both reputational damage and uncomfortable scrutiny from the regulator.
Failing to get to grips with D&I leaves leaders and managers open to unlimited fines, and firms to regulatory action and/or the significant legal costs that come with defending discrimination claims and paying out settlements or compensation.
So if you’re in any doubt at all as to what your firm’s diversity and inclusion policy should look like - and whether it will work for your business and for the FCA - please don’t put your head in the sand. Call our expert team today and we can help you turn a potential liability into a real asset for your business. Email HRhelp@ihrsolutions.co.uk, call 01604 709509 or visit our website.