January 10, 2024


by: kiran


Tags: Diversity & Inclusion

Overview of Key D&I Developments in 2024

The FCA, alongside the PRA has issued a Consultation paper on D&I in the financial sector. The aim is that this will improve outcomes for markets and consumers by reducing groupthink, supporting healthy work cultures, enhancing understanding of diverse consumer needs, and unlocking diverse talent.

The Senior Managers and Certification Regime (SMCR) emphasises the accountability of senior managers in financial institutions, this has been reinforced by the FCA in the recent Dear CEO/Portfolio letters they issued. This includes Senior Management Function roles fostering a culture of diversity and inclusion, which is crucial for effective governance and decision-making, and driving the tone from the top. The FCA’s focus areas include the Consumer Duty, which is related to treating customers fairly and ethically, reflecting the broader ethos of an inclusive and responsible corporate culture by:

  1. Understanding Customer Needs: Firms must understand their target market and the needs of their customers. This involves a commitment to understanding the characteristics, objectives, and needs of different customer groups.
  2. Delivering Fair Value: Products and services should offer fair value to customers. Firms need to assess how products and services perform in the market and the outcomes they deliver.
  3. Clear Communications: Information provided to customers must be clear, understandable, and not misleading, enabling customers to make informed decisions.
  4. Customer Support and Service: Firms should provide a level of support that meets the needs of their customers, especially those who are vulnerable or face particular challenges.

In the insurance sector, challenges such as the gender pay gap and the representation of minority groups at senior levels remain significant. The industry faces the task of translating D&I policies into tangible changes in corporate culture and practices.

While there is support for the FCA’s drive for greater diversity, equality, and inclusion, some concerns include the potential for unintended consequences of the proposals, which may lead to resource implications and an anti-diversity backlash. The FCA’s approach suggests that training and education are crucial, but not sufficient by themselves, for changing mindsets and behaviours in organisations. The insurance sector needs industry-wide collaboration and collective efforts in D&I initiatives.

The FCA’s proposals treat D&I as a non-financial risk, which calls for its formal recognition in risk registers. This approach aligns with the broader regulatory focus on internal culture and conduct in financial firms.

The FCA emphasises that misconduct, including bullying and sexual harassment, poses a risk to a healthy firm culture. The guidelines highlight the need for firms to take decisive action against such behaviours, as they directly impact the firm’s internal governance and the well-being of employees.

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