The FCA has published the findings from its review of how financial services firms are approaching diversity and inclusion strategies. The regulator is encouraging all firms to consider the findings in the development of their own policies and practices.
The review is part of the FCA’s wider work to improve D&I in the financial services sector which includes the joint Discussion Paper, published in July 2021, in which the FCA, PRA and Bank of England considered the current state of diversity and inclusion in the financial. services industry, setting out the case that more progress advances the FCA’s objectives and proposed some areas for potential policy intervention. The FCA plans to consult on those proposals in 2023.
In the meantime, the FCA decided to get a better understanding of the current state of diversity and inclusion approaches in regulated firms.
The FCA says the survey had three goals: First, to give firms and others a picture of the current position, allowing leaders to consider where initiatives might be relevant in their own firms. Secondly, to encourage further industry action. Thirdly, to help it develop a supervisory approach that it can use as the basis for future engagement with firms.
So, let’s get a view on this from Anne Sammon who is working closely with a number of firms in the sector. I asked Anne what she made of the FCA’s paper:
Anne Sammon: “So, the main point I take from it, Joe, well there’s a couple actually. So, I think there’s a kind of positive message around we know that the FS sector has started to drive change and start started to look at diversity and inclusion in a really positive progressive way and that’s a really positive message that can come from some of these. studies, but I think the really key piece for me out of this is the fact that the regulator itself has picked up on the need for firms to take data, and use that data, to make data-driven decisions around how to improve diversity and inclusion within their own organizations rather than just doing, what we’ve seen some in the past do, which is kind of just grasp at every possible diversity program that is out there without thinking about what’s actually needed within their own organizations, what their own systemic barriers are to diverse candidates and, also, importantly as well, there’s a focus in this study on inclusion. So, we quite often see clients very focused around the diversity piece, because that’s very easy to measure, but ignoring the whole point around inclusion. There’s no point in having a million diverse employees if you’ve not got an inclusive environment because they just won’t stay.”
Joe Glavina: “In the chapter on data they talk about the importance of ‘trust and effective employee engagement’ in driving up declaration rates. So, in one example they said an action as simple as showing how to update diversity data at team meetings improved declaration rates.”
Anne Sammon: “Yes, I think this is a really important piece around data collection. What we see is that sometimes organizations get caught up in the kind of practicalities, the logistics, of how you go about collecting data, what does the law say on data collection, without actually thinking about the really important piece which is how do you get. employees to trust that what you’re doing with that data is the right thing and that you’re going to use it for positive means? That point is so important and we spend quite a lot of time working with clients, along with our colleagues from Brook Graham, around the types of issues they can do to improve trust and to kind of make that communication around diversity data a really positive experience. .”
Joe Glavina: “They also talk about recognizing when you’ve got a ‘reliable data’ set you can work with and there central message seems to be you don’t wait until you think you’ve got the perfect data set.”
Anne Sammon: “Yes, I think that’s a really important piece. We are never going to have a perfect dataset; I can’t think of any organization that I work with that has 100% declaration rate so you have to work with what you’ve got. You just have to kind of be skeptical about what you’ve got if you’ve got a much lower declaration rate. Also, I think it then begs the question of why have you got a low declaration rate? I’ve seen clients in the past where we’ve got really positive diversity stats that come from those much lower rates because all those people who haven’t got diverse characteristics are less willing to fill out the diversity data piece because they’re worried. that they might be adversely impacted by it. So, it’s about using that low declaration rate and thinking about why? What can we do in future to improve that number, but also not just saying ‘oh, we’ve got a really low declaration rate so there’s just nothing we can do.”
Joe Glavina: “Finally, Anne, they talk about firms failing to make the best use of the data they’ve collected.”
Anne Sammon: “So, I think this is this is absolutely key. What we sometimes see is that organizations will think about diversity data, and they’ll think about those employee engagement surveys that they send out, and those are the data points that they use, but there are so many different data points that firms have access. to. So, exit interviews are a really rich source of data and can tell you a lot about whether your environment is inclusive or not and you can use that data to then address particular issues and to drive diversity programs that are targeted at those issues. The same when we look promotion, recruitment, pipelines. If you look at how many people you’ve got the start of your process with diverse characteristics and how many you’ve got at the end, you can work out where in the process they fall out. So, are you not getting enough through the door at the beginning, or is there a problem with your process that means that they are being excluded from being promoted? Taking that kind of data and working through it is really important because it allows you to identify what the problem is within your organization rather than just applying a kind of one-size-fits-all which never produces the kind of tangible results that are really. important in this space.”
The FCA’s review paper was published on 12 December and is called ‘Understanding approaches to D&I in financial services’. We’ve put a copy of it in the transcript of this program.
– Link to FCA Review: ‘Understanding approaches to D&I in financial services’