The Financial Services sector has been under scrutiny and heavy public pressure in the past years, denouncing banks for a lack of management discipline and regulation implementation. But there is a key deciding element that can make the difference in a bank’s business model: The right definition of corporate governance. The board should be able to answer key questions to understand what “good” corporate governance actually means.
FINMA and corporate culture
The incorporation of a strong corporate culture, based on the right employee values, drives the urge to prevent any reputational damage, whilst securing a healthy and ethical business.
At FINMA (Eidgenössische Finanzmarktaufsicht), good corporate culture is defined by integrity, ethics and compliance. These core values should affect an entire company and go beyond mere intra-departmental application.
The FINMA 2016 Annual Report states that Switzerland, as the world’s leading private wealth management hub, must protect its financial system from misuse. Also FINMA Chief Executive Officer Mark Branson, has highlighted that “a culture in which bank employees feel personally committed to combatting money laundering” is essential (FINMA Annual Media conference 2016).
Key questions to consider for board members
When assessing their approach to corporate culture, boards should also consider the following key questions:
Leveraging management information
Management boards should look to leverage existing management information (MI) that provides insight into the organization’s culture. With the vast amount of information, the challenge is to effectively filter data for the board. Chairmen and CEOs increasingly demand explicit MI and whistleblowing within the organisation to promote an open culture where employee concerns are raised to higher instances.
A second key element in the MI system is to develop a self-learning organisation which develops an institutional memory through a post mortem of incidents and explanations of decision-making processes.
The ultimate focus areas for a board revolve around the evaluation of corporate culture:
• What is the ROI of your culture?
• How does your corporate culture impact your brand value?
• To which extent can reputational damage affect your brand value?
To build and maintain a healthy corporate culture, we recommend the board to be the driving force behind embedding core organizational values. Particularly relevant are employee risk awareness, correct information management and the nurturing of successful culture-developing activities. With corporate governance properly applied, companies will be better shielded against reputational meltdowns in the years to come.
To read more about this topic, please visit the Deloitte Evolving Board website.