Sheree Howard, FCA’s Executive Director of Risk and Compliance Oversight spoke about the importance of the execution of a plan being as vital as its ideology and purpose. She said firms must look at whether they have clear sight of the risks they face and the controls needed to manage them as well as challenging whether their plan is the right plan at all – and that they should not be afraid to challenge.
She said one of FCA’s current concerns is the danger of concentration – specifically where financial institutions have not known or had underestimated the relationships between counterparties or the extent to which specific markets comprised similar actors who all had the same incentives. She gave as an example a market in which, where one actor stopped buying, they would all stop.
She encouraged all who work in the sector to challenge, even when challenging the boss, and said that a culture that tolerates non-financial misconduct is unlikely to be one where people will feel able to speak up, and this raises questions about decision making and risk management in the firm. And she stressed that diversity of perspectives and thought as part of an inclusive culture results in stronger and better governance, decision making and risk management.
Finally, she looked at how periods of financial stress can lead to more risk taking around conduct and regulation but urged firms to think of the consequences of conduct events that have ultimately made bad times even worse. She noted how regulators value the second and third lines and the role they plan in helping senior management.