The FCA has published a speech given by Mark Steward, Director of Enforcement and Market Oversight at the FCA. In his speech Mr Steward discusses culture and governance.

Mr Steward states that from a regulatory standpoint good rules and standards can describe the expectations and set the boundaries but more is needed. First, a detailed understanding of the nature of the business. A good effective understanding of the nature of the business means knowing how the front line, the middle management and the senior management actually operate. Secondly, senior management cannot be watching everything all the time, there needs to be effective systems and controls to ensure the business is operating effectively and in accordance with standards of conduct that have been designed and approved by senior management. Third, there needs to be “a healthy dose of reality”. Mr Steward describes this as there “being a risk-focused counterfactual or counterintuitive audit from the perspective of the cynic who is able to exploit the price of the system’s gaps – yes, the cynic’s perspective is not without value.”

Mr Steward explains that a key challenge in making culture a pragmatic reality is the difficulty in knowing whether the culture that exists is good or even working. One way of knowing when culture has failed is when things go wrong and get worse or just go wrong again. Key questions here include:

  • How quickly does it take for problems to escalate to the right person or group of persons for effective decision making or action?
  • How many problems linger in the in-box or the draft box or the bottom drawer beyond their easily flexible date?
  • How difficult is it to fix things once they are detected?

View Culture and governance, 11 November 2015