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FCA speech on cultural evolution: How culture must change to meet expectations

12 July 2023
Emily Shepperd, Chief Operating Officer and Executive Director of Authorisations at the FCA delivered a speech to the Westminster Business Forum highlighting the importance of culture for confidence and how it can dictate bottom lines.  

With the first phase of the Consumer Duty coming into force on 31 July 2023, firms are focusing on good customer outcomes and preparing to understand and evidence whether those outcomes are being met.  The speech leaves no doubt about the importance of culture when considering how firms will meet the requirements of the Consumer Duty.  

Some highlights from the speech together with key considerations include:

The importance of active listening – especially for leaders:  Active listening creates a workplace environment where people at all levels feel comfortable to use their voices, share their experiences and provide meaningful challenge.  Diversity of thought is inevitably fostered and ultimately better, more innovative outcomes are driven for firms and their customers. 

Key considerations: What tangible action has been put in place to ensure senior leaders are actively listening to and engaging with the wider workforce and consumers? 

Reputation is key:  We have seen many examples of sexual harassment in recent years. This includes the FT exposé on inappropriate behaviour at a male-only dinner and Theresa May having to introduce a mediation and proper grievance procedure following a string of allegations involving politicians.  As Warren Buffet once said "It takes 20 years to build a reputation and five minutes to ruin it.  If you think about that, you'll do things differently." 

Key considerations:  Are leaders and employees aware of what constitutes 'above or below the line' behaviour?  Do leaders recognise the full consequences of what can result in an unintended violation of dignity?  Is the tone from the top setting the right culture and reinforcing the desired standard of behaviour?  Do employees feel empowered to intervene and step in where there are examples of inappropriate behaviour?

Purpose underpins culture: Culture is central to the FCA's supervisory model.  Firms with healthy cultures will be able to adapt to the changing world and to ongoing consumer expectations.  Culture underpins conduct and therefore business performance and confidence. Those working at a senior level in financial services must pass and continue to meet the conditions of a fitness and proprietary assessment – consideration will be given to honesty, integrity and reputation.  Firms should ask tough questions when assessing fitness and propriety of staff in financial services and all regulated environments.  

Key considerations: How would you describe your firm's culture? What evidence do you have to ensure behaviours, beliefs and mindsets are consistently aligned and reflect your ethical values?  How does purpose drive the behaviours and actions across the firm?  How do you measure this?

Consumer duty changes culture: Firms cannot afford to pay lip service to culture. It must reflect what an organisation stands for and how it conducts itself, given the increase in scrutiny by stakeholders and emphasis of action over words. The Consumer Duty puts an onus on financial services firms to design their goods and services with good consumer outcomes from the beginning.  Firms' boards and senior management will need to embed a culture in which good outcomes for consumers are central.  Accountability will be key and firms can expect to be asked to demonstrate at every stage of the regulatory lifecycle how their business model, the actions they have taken, and their culture are focused on good consumer outcomes.  

Key considerations: In the context of the specific requirements set out in the Consumer Duty, does your firm's culture promote good consumer outcomes?  If so, can you provide evidence of how your culture achieves that? Are you able to measure and assess the change in your desired behaviours to ensure that good consumer outcomes are being promoted?   

FCA's evolving culture: Recognising the culture shift the FCA has gone through, a number of steps are being taken to ensure the FCA is working efficiently.  Ultimately the FCA helps prevent serious harm, sets and tests higher standards, in order to promote market integrity, protect consumers and promote effective competition.  

Key considerations: Is your firm familiar with the changes at the FCA and what that means for firms in terms of the FCA's expectations and regulatory priorities?  

Support from sandbox through the lifecycle of a firm: With a focus on promoting competitiveness and economic growth, the speech outlined the importance of innovation and how firms in their sandboxes will be offered guidance once authorised.    Although being open to change is desirable, the real focus is to ensure the organisation fosters openness.  Employees need to feel that they are physically and psychologically safe to  use their voices and be heard. This is why the FCA has set up steps to improve whistleblower confidence earlier this year.  

Key considerations: Is your firm familiar with the steps needed to improve whistleblower confidence?  Are your firm's policies and procedures in-line with the standards required? Are you complying with the training and education requirements on whistleblowing?  Do you recognise and are you actively addressing the importance of psychological safety in fostering an inclusive workplace environment where the status quo can be challenged, inappropriate behaviour can be reported without fear of retribution, and innovation is valued and encouraged? 

Stopping repeat recruitment of bad apples: Being aware of past misconduct in new recruits is a key focus.  It is reportedly too easy for people with poor behaviour to move from firm to firm taking their poor behaviours with them and exiting businesses with packages effectively providing reward for inappropriate conduct.  Regulatory referencing should be taken more seriously and where necessary probationary periods should be extended, extra monitoring added or activity restricted.  Adverse information provided in references should be taken seriously.  

Key considerations: What steps are taken by your firm if an adverse reference is received?  What happens if inappropriate behaviours and conduct are identified during a probationary period?  What references do you provide when someone has left due to inappropriate behaviour


The Consumer Duty sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers' needs first. Adapting policies and procedures, developing reward and recognition packages and implementing changes in the operating model are only part of the response. Assessing the impact on workplace culture and leading the required cultural change with good customer outcomes at the centre needs to be a top priority for all businesses.  

As outlined in the recent speech, culture is not just a slogan on your website, it is the very essence of what an organisation stands for, embodied by how it conducts itself.  In other words, it's not about what Boards and Senior Management say, but what they do and the impact they have.  It is the leadership actions and behaviour that create a culture, not the policies or procedures, although they do play a part in reinforcing it. Firms will be judged on what tangible changes they are driving across their culture and behaviours, in order to prioritise good customer outcomes. 

At DWF we can provide:

  • Workplace culture audits to stress test organisational culture, identify potential behavioural risk exposure and develop risk-based remedial interventions that will actively mitigate culture risk.
  • Independent reviews and/or design of ethical conduct and business integrity frameworks aligned to corporate purpose, valued behaviours and regulatory risk and compliance requirements (including ethical decision-making and ethical business scenario analysis).
  • Inclusion and diversity strategic design, development and implementation including dashboards, data and metrics, and global good practice. 
  • Tailored executive education programmes via Responsibility (our ESG educational programme) to embed cultural change and bespoke experiential learning and development training for all employees and directors on inclusive skills and behaviours.  For our latest brochure please follow this link.
  • A financial services sector focused approach.  We take a multi-disciplinary approach to advising in this area, combining our financial services sector based knowledge together with our ESG experience.

Further Reading