Firms with a greater understanding of diversity and inclusion will be “better equipped” to provide products and services for a diverse consumer base, the FCA has said.
Speaking at the Financial Conduct Authority’s diversity and inclusion webinar, executive director of consumers and competition, Sheldon Mills, discussed the diversity and inclusion consultation that the FCA and Prudential Regulation Authority published back in September.
Mills said: “When firms have a healthy culture and have diversity of thought at all levels, staff feel more able to raise concerns and speak up. It’s about psychological safety.
“This makes firms better equipped to tackle groupthink, improve decision making, and ultimately strengthen risk management.”
He explained this would enable problems to be remedied at an early stage before they might develop into regulatory breaches with negative impacts on consumer protection, market integrity and competition in the interests of consumers.
Mills additionally said that if firms have diverse perspectives and enable all voices to be heard, they are more likely to create and deploy innovative products and services.
He also said that how diverse and inclusive a firm is impacts on how well it is likely to be able to understand and meet the diverse needs of its customers.
Mills also stated: “Our most recent Financial Lives survey showed that many consumers in minority groups face unequal outcomes and barriers to access.
“One of the factors underpinning the international competitiveness of the UK’s financial services sector is its broad and highly skilled talent pool and the capacity to attract and retain such talent or human capital.
“We consider that proposals to increase levels of D&I within firms can further help unlock talent from individuals with under-represented characteristics and support their career progression.
“This means sustainably widening the sector’s talent pool and thereby bolstering further the UK financial services sector’s reputation.”
Mills also stated that the importance of this work lies in the outcomes the FCA wants to achieve.
This includes helping firms to develop healthier cultures, reduce groupthink, unlock new talent, promote innovation, and have a greater understanding of and ability to provide for their diverse customer needs.
“Flexibility is central to our framework. We are not adopting a one size fits all approach and we understand that each firm is different. There are firms with different sizes, different local populations, and it’s important that the proposal is flexible to meet those.”
PRA's perspective
The PRA’s perspective was offered by the Bank of England's prudential policy director, Gareth Truran, who stated: “From our primary objectives, we see a clear link between improved diversity and inclusion outcomes in firms and our primary statutory objectives at the PRA.”
Truran outlined that two main drivers of his desired outcomes are reduced groupthink and promoting a culture where individuals and firms feel able to speak up and challenge.
Additionally, the Bank of England's prudential policy directorate manager, Tina Harris, pointed out that the PRA and the FCA have been developing their approach to D&I since 2018 in a coordinated way.
