July 7, 2021 Diversity and inclusion in the financial sector
A joint initiative by the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Bank of England (BoE) looks towards improving the level of diversity and inclusion across the financial sector. In a press release, the regulators commented that increased diversity and inclusion could result in “improved governance, decision-making and risk management within firms, a more innovative industry, and products and services better suited to the diverse needs of consumers.”
As a first step towards their goal, the regulators have launched a discussion paper entitled “Diversity and inclusion in the financial sector – working together to drive change.” The paper examines the role of regulators in promoting diversity as well as the existing diversity requirements and expectations which are placed on firms in the financial sector; including the relevant sections of the corporate governance code. It then goes on to examine what metrics could be used to measure progress, before going on to look at what actions could be taken in order to drive diversity and inclusion.
Although the paper, which closes for consultation on 30th September 2021, is aimed at the financial services sector, many of the discussion points could equally apply to other sectors. These include the importance of leaders setting the tone from the top, boards monitoring and challenging actions to drive diversity, and establishing inclusive cultures in which people feel empowered to speak out and raise concerns.
The part played by boards in driving diversity and inclusion cannot be understated. Boards themselves need to be representative, with the paper commenting that: “The credibility of a firm’s diversity and inclusion strategy could be called into question if it is overseen by a homogenous group without diverse experience and thought.” So board succession planning processes may well be key in identifying, attracting and appointing a diverse range of candidates.
Individual accountability also plays its part, with the discussion paper examining whether diversity and inclusion targets should be included in the objectives of senior managers and therefore form part of the remuneration package matrix. Training too comes in for a mention, helping to ensure that those lower down in the organisation are given the sills which they need in order to progress.
The challenge of diversity and inclusion is one which all organisations should be facing. As the introduction to the paper comments: “Recognition of the importance of diversity and inclusion has grown over recent years, and events across the world have highlighted existing disparities, inequalities and the need for further progress.”