Uh oh – more “culture change” is being prescribed

In a speech on 5th November the UK FCA let off a few fireworks, encouraging Chief Risk Officers to take more risks. 

https://www.fca.org.uk/news/speeches/rebalancing-risk-growth-role-chief-risk-officer

And I quote:

“𝘛𝘩𝘪𝘴 𝘴𝘩𝘪𝘧𝘵 𝘵𝘰 𝘰𝘶𝘵𝘤𝘰𝘮𝘦𝘴𝘧𝘰𝘤𝘶𝘴𝘦𝘥 𝘢𝘯𝘥 𝘭𝘦𝘴𝘴 𝘱𝘳𝘦𝘴𝘤𝘳𝘪𝘱𝘵𝘪𝘷𝘦 𝘳𝘶𝘭𝘦𝘴 𝘮𝘢𝘺 𝘧𝘦𝘦𝘭 𝘶𝘯𝘤𝘰𝘮𝘧𝘰𝘳𝘵𝘢𝘣𝘭𝘦 𝘧𝘰𝘳 𝘴𝘰𝘮𝘦 𝘰𝘧 𝘺𝘰𝘶 𝘪𝘯 𝘵𝘩𝘪𝘴 𝘳𝘰𝘰𝘮. 𝘐𝘵 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘴 𝘢 𝘤𝘶𝘭𝘵𝘶𝘳𝘦 𝘤𝘩𝘢𝘯𝘨𝘦 – 𝘣𝘰𝘵𝘩 𝘪𝘯 𝘵𝘩𝘦 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺 𝘢𝘯𝘥, 𝘺𝘦𝘴, 𝘧𝘰𝘳 𝘶𝘴 𝘢 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘰𝘳. 𝘈𝘯𝘥 𝘪𝘵 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘴 𝘮𝘰𝘳𝘦 𝘢𝘤𝘵𝘪𝘷𝘦 𝘳𝘪𝘴𝘬 𝘮𝘢𝘯𝘢𝘨𝘦𝘮𝘦𝘯𝘵 𝘸𝘪𝘵𝘩𝘪𝘯 𝘧𝘪𝘳𝘮𝘴”

Without delving into too much detail of where excessive process and caution could doubtless be eased in both firms and the FCA, I remain queasy when powerful organizations prescribe 𝐜𝐮𝐥𝐭𝐮𝐫𝐞 𝐜𝐡𝐚𝐧𝐠𝐞 as a requirement, with no meaningful explanation of what they mean by 𝐜𝐮𝐥𝐭𝐮𝐫𝐞, nor understanding of what can change, nor how, and what unexpected repercussions may ensue. 

If they are talking about culture as a slogan or aspiration, fill your boots and change the wording.

Perhaps issue all Bank CEOs and CROs (and FCA Supervisors) with a perspex tombstone inscribed with “𝐭𝐚𝐤𝐞 𝐦𝐨𝐫𝐞 𝐫𝐢𝐬𝐤𝐬”.

But if they are talking about the complex behavioural landscape within Banks and Regulators, and the wide variety of conflicting factors that influence behaviour and decision making, the drivers and dilemmas, action and inaction - then they may need to try harder. 

Most Banks and Regulators have precious little expertise, capability and insight to understand and navigate the behavioural terrain. It is a blind spot about a blind spot, not given the same priority as the traditional lenses of risk, compliance and control. 

In the current de-regulatory push, as we seek to move away from too much reliance on regulation, rules, capital and control, then it is imperative that this is counterbalanced with a genuine interest in, and understanding of, the psychological. 

The speech concludes with a recognition that a CROs life:

“𝘪𝘴 𝘢 𝘣𝘢𝘭𝘢𝘯𝘤𝘪𝘯𝘨 𝘢𝘤𝘵 𝘰𝘧 𝘪𝘯𝘵𝘦𝘳𝘯𝘢𝘭 𝘢𝘯𝘥 𝘦𝘹𝘵𝘦𝘳𝘯𝘢𝘭 𝘦𝘹𝘱𝘦𝘤𝘵𝘢𝘵𝘪𝘰𝘯𝘴, 𝘵𝘩𝘦 𝘥𝘦𝘴𝘪𝘳𝘦 𝘧𝘰𝘳 𝘨𝘳𝘰𝘸𝘵𝘩 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘧𝘦𝘢𝘳 𝘰𝘧 𝘧𝘢𝘪𝘭𝘶𝘳𝘦”

And what is this, if not a behavioural challenge?

The final sentence is:

“𝘚𝘰, 𝘪𝘧 𝘺𝘰𝘶 𝘴𝘦𝘦 𝘴𝘵𝘪𝘤𝘬𝘪𝘯𝘨 𝘱𝘰𝘪𝘯𝘵𝘴, 𝘮𝘺𝘵𝘩𝘴 𝘵𝘩𝘢𝘵 𝘯𝘦𝘦𝘥 𝘣𝘶𝘴𝘵𝘪𝘯𝘨, 𝘰𝘳 𝘰𝘱𝘱𝘰𝘳𝘵𝘶𝘯𝘪𝘵𝘪𝘦𝘴 𝘵𝘩𝘢𝘵 𝘢𝘳𝘦 𝘣𝘦𝘪𝘯𝘨 𝘮𝘪𝘴𝘴𝘦𝘥, 𝘤𝘰𝘮𝘦 𝘢𝘯𝘥 𝘵𝘦𝘭𝘭 𝘶𝘴. 𝘞𝘦 𝘸𝘢𝘯𝘵 𝘵𝘰 𝘩𝘦𝘢𝘳 𝘧𝘳𝘰𝘮 𝘺𝘰𝘶.”

I have come and told you. Repeatedly. And I am happy to discuss again.

Otherwise the 5th November firework is in danger of being a damp squib, or going off in your face.