Purpose essential to prevent next financial crisis
Unless we embed a sense of purpose in financial services, we are laying foundations for the next crisis, according to ICAEW’s latest report, Culture and Purpose in Financial Services.
The report studies the conduct and culture that created some of the UK’s scandals, and suggests what can be done to provide a blueprint for a better future. It considers three practical aspects of creating and maintaining a good culture; conduct, incentives and the way financial performance is measured and understood.
Looking at these elements in terms of real human behaviour reveals some key lessons. These include the need for everyone within an organisation to be a role model, the importance of non-financial incentives like recognition in decision making and the distorting effect on behaviour of prioritising certain financial metrics.
Philippa Kelly, ICAEW Head of Financial Services, said: “We need financial services in order to function as a society, but across the industry people lost sight of what their products and services did beyond making money. We’ve seen a number of scandals where customers have been failed, misselling, benchmark fixing and more. What was missing was an understanding of the purpose of the financial products and services and how customers use them.
“A culture of staff prioritising profit above all else has led to profitable but unhelpful products being sold to unwitting customers, resulting in services they can’t use – PPI being the most famous example.
“The best way to protect integrity is to put customer interest right at the heart of financial services. This may mean reduced profits in the short term, but it means longer-term benefits in terms of customer relationships, protecting business reputation and safeguarding against fraud and other misbehaviour. Penalties for misconduct can act as a deterrent to a degree, but a clear sense of purpose will allow people to make instinctive decisions about what is the right thing to do.”
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