If you work in Compliance in the financial services industry, you will have noticed some gradual changes over the last year or so in the way the Financial Conduct Authority approaches regulation.
In a blog earlier this year, we looked at compliance trends for 2016 identified by Thomson Reuters. Among the findings of their research, 58% of the businesses they surveyed believed ‘promoting a corporate culture of integrity to be the ultimate goal of their compliance and ethic programs’.
This is a theme seen echoed at the FCA. The regulator’s speeches, news releases and reports in recent months have all emphasised the FCA’s preference for compliance as a central part of a firm’s culture, rather than an ‘add on’ activity.
The appointment of Andrew Bailey as FCA Chief Executive was seen to endorse this approach, with many commentators believing that it signals a
lighter touch by the regulator. (We look at Bailey’s appointment and why many believe it will see a more ‘hands off’ approach here).
A new approach by the FCA
Increasingly, the FCA is encouraging firms away from a ‘tick box’ approach to compliance. The regulator wants its role to be less one of intervention and policing and more one of guidance and enablement.
Representatives from the regulator have repeated this preference regularly in recent months. At a presentation at the Wealth Management Association Summit in London in November last year, chairman John Griffith-Jones told wealth management firms that they should spend less time on regulation. He suggested they do this by embedding good practice into the fabric of their businesses, rather than seeing compliance as a separate activity, or retrospectively ensuring a compliant approach once work has been done.
This is all very well. But if firms are expected to self-govern when it comes to compliance, they need to step up; to take a proactive stance on compliance matters. This might mean a big change in approach for many regulated businesses.
Here we look at how you can make sure compliance and good governance are embedded within your firm’s culture.
1. Make compliance built-in, not bolt-on
If firms are to spend less time on ‘overlaying’ a compliant approach – on tick boxes and measures – you need to make sure good governance, compliance and corporate ethics are a fundamental part of your business.
It’s not enough to send near-final financial promotions to Compliance with short deadlines. Or to devise operational processes – and then ask for the Compliance seal of approval.
You need to consider whether your approach complies with the requirements of the regulator at all stages and in all areas of your business. This means:
- In product development – do your products meet the regulator’s requirements when it comes to Treating Customers Fairly? Do they follow any specific guidance for your sector? – there are particular regulations for some areas – for example mortgage broking, where the MCOB requirements were recently updated
- When designing your financial promotions; embedding compliance into your marketing and communications materials, including digital marketing such as social media
Within the processes and procedures that your business is based on
For too many firms, ‘compliance’ is an add-on, an afterthought. In fact, a culture of compliance should run through your business like the proverbial wording in a stick of rock.
2. Ensure compliance and creativity aren’t seen as mutually exclusive
Often, Compliance and Marketing teams are totally separate. Their only interaction takes place when a financial promotion needs to be signed off – often in a hurry, to meet a tight marketing deadline.
Too frequently, Compliance and Marketing are viewed as pulling in opposite directions – with Compliance the staid nanny putting a stop to Marketing’s creative fun. This view needs to change if you want to embed a compliance culture within your firm.
Make it easy for Compliance and Marketing to work together. Gear your financial promotions processes to pain-free Compliance approval. Collaborative reviewing and automated workflows can help here, ensuring compliance is considered at every stage. You can read more about the benefits of automated workflows for Compliance teams here.
Compliance teams can help by ensuring that Marketing and Sales teams understand what makes a compliant financial promotion – our blog on How to help your Marketing team write content Compliance can approve has more on this.
3. Make everyone accountable for compliance
If you want to embed compliance into your business’s collective ethos, it needs to be something everyone is responsible for. Removing the ‘us and them’ view of Compliance and Marketing/Sales/the business as a whole will be a big step forward in achieving this – but this isn’t the only challenge.
Whether it’s operations, marketing, sales or customer service – everyone needs to be made aware that compliance is their job. It’s not something that the Compliance team does in isolation, and after everyone else has finished their part. Compliance needs to be a consideration at every stage, and for everyone.
This is true vertically as well as horizontally – compliance can’t be siloed, and neither can it be ignored by your management. The opposite in fact – a compliant culture needs to be driven from the highest level in your organisation. Your Board and corporate leadership need to demonstrate good governance and a compliant approach. There’s no room for lip service if you want a truly compliant company culture.
4. Encourage openness and honesty
Mistakes happen. You need to acknowledge this and make it easy for people to own up to compliance slip-ups. Hiding issues under the carpet is not the way to build a compliant culture. Learning from mistakes is vital and encouraging people to be honest about any compliance issues or near-misses is a vital part of this.
Repeated issues may be a sign of intrinsic compliance failings that need to be addressed – you can only start to deal with these by getting them out into the open.
5. Don’t become over-concerned about one set of stakeholders
Firms where profits and shareholders’ interests have been prioritised over those of other stakeholders can struggle to deal properly with compliance failings. Showing a ‘good face’ to the world is a natural part of business (and life!) – but if this hides darker compliance issues, all is not well.
Ensuring compliance is at the heart of what you do means making sure employees are not just assessed on profits. Measures around corporate ethics are vital in making sure compliance is embedded into your approaches, systems and outputs.
These five steps give you a good start point when it comes to embedding a compliant approach within your corporate culture. You can read more on how to do this, with tips and advice, in our whitepaper, How to embed a compliance culture into your business. It’s free and you can download a copy here.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.