Management information on culture

In recent years, culture of a financial institution has steadily become a top priority for the financial services industry. Just how regulators supervise culture remains the basis of much debate, as does how a firm can effectively assess their own culture. 

Drawing on Deloitte member firm culture experts from across EMEA, the US and the Asia-Pacific region, as well as our experience of working with clients, this paper seeks to answer the following questions:

• How can firms articulate their target culture?
• What are the principles for collecting meaningful culture management information?
• How can firms put the principles into practice?
• How do regulatory approaches to culture differ across jurisdictions?

The APAC view

Despite the growing focus on culture across the globe, national regulatory expectations and industry responses remain varied, especially within the Asia Pacific region. Australia’s regulators have taken a progressive stance on risk culture – even by global standards. Boards and Executive teams of Australian financial institutions are already required to demonstrate they understand their firm’s risk culture and the Australian Prudential Regulation Authority is expected to publish their industry-wide research on risk culture in mid-2016. This research will positively contribute to the culture conversation and help institutions make informed decisions to reliably understand risk culture. We expect current practices such as relying on staff engagement surveys (to measure risk culture) may no longer suffice – particularly where leaders are measured and incentivised on staff engagement. In other parts of Asia, regulators have not yet adopted forward looking risk culture assessments, however we don’t expect them to be far behind.

We believe the industry response to the regulatory focus on risk culture has thus far been inconsistent and largely insufficient. Australian firms should consider these eight principles to guide their approach, as part of broader attempts to surface any organisational ‘design flaws’ that may be at the heart of poor culture and diagnose the root causes of these weaknesses to substantively redress.