Firms’ CULTURE is in danger of becoming merely regulatory and “yet another catchphrase” if they fail to see beyond their systems and controls, the Financial Conduct Authority’s (FCA) new director of enforcement and market oversight (Mark Steward) has said.
He went on to offer some other golden nuggets of sound observations and advise:-
- Good rules and standards alone cannot create the environment in which good governance, regulatory compliance and fair process magically appear – more is needed
- Rules and standards alone could not be relied on to create good culture and governance in firms, they were merely starting points.
- Firms need to ensure they understand the nature of their business from their front line staff up to their senior management.
- Systems and controls need to be made effective through active implementation and control of their upkeep, there needs to be a healthy dose of reality.
- The paradox of systems and controls is they can lull senior management into a false sense of security.
- Systems and controls cannot be ‘set and forget’. In fact, let us not forget that systems and controls are predictable, which means they have gaps that can be exploited.
- What is needed is a risk-focused counterfactual or counterintuitive audit from the perspective of the cynic who is able to exploit the price of the system’s gaps – yes, the cynic’s perspective is not without value.
- Firms should also ask themselves how effective they are at responding when things go wrong – a key measures in evaluating their culture
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