What obstacles lie in the way of a compliant culture at a bank? What disciplines can compliance officers bring to bear when tackling them? Here we interview an expert on 'culture,' Peter Richardson (pictured), the managing director of Protiviti UK.

Kweku Adoboli, the UBS rogue trader who was convicted on two counts of fraud in 2012 after losing £1.4 billion and threatening the bank's very existence, has lost his latest appeal against deportation to his native Ghana. He warned the public recently that banking culture remains unchanged since he was a trader and that similar crimes will happen again due to managerial pressure on traders to generate profits by any means. The nebulous topic of 'culture' seems to be as important as ever. How should compliance officers gauge the culture of their firms and improve it?

To answer this question, Compliance Matters spoke to Peter Richardson of Protiviti UK, the global risk and business consulting firm. This article takes the form of a question-and-answer session.

Q: What problems are you grappling with at the moment?

A: The extent to which enough can be done in the short term to change culture. People believe that the 'tone at the top' can change culture quickly. Of course, the tone at the top is essential but the biggest issue to my mind is the tone in the middle, which directly influences the underlying behaviour in the organisation, which is where culture really dwells. The people at the top can come out with some high-sounding principles but if the underlying groundswell says that 'this is hype' or 'this is perceived wisdom' then it won't change anything at all.

Look at Dr Edgar Shein's three layers of culture. Schein divides organisational culture into three levels: artefacts, which lie at the surface and include those aspects (such as dress) that are easy to discern but hard to understand; then espoused beliefs and values; and finally basic underlying assumptions at the bottom. These are unconscious beliefs, perceptions, thoughts and feelings that people take for granted and are the ultimate sources of action.

The artefacts of the business lie at the top. These range from the artworks you see when you enter the building and the uniforms that the security guards are wearing all the way over to the marketing bumf and the policies that the firm promulgates. The next layer down holds the espoused beliefs of the firm – the ideals, the aspirations. The 'tone at the top' fits into this category. At the base, you see the basic, underlying assumptions. These are the things that denizens of the firm actually believe. To paraphrase Bob Diamond, culture is what drives people to do what they do when nobody else is looking. My knowledge of this comes from years of experience.

This is an inverted pyramid. An outside observer only sees things nearer the top, but the things at the bottom are what fundamentally make things happen. When people are describing the firm's culture, they're usually referring to the things near the top of the pyramid. You might ask them "how are you measuring your firm's culture?" In this case they won't know that either, beyond pointing to the visible.

Q. Kweku committed fraud and false accounting in an effort to hide rogue trades. What leads to such behaviour as his?

A: My view of the world that creates rogue traders is that they don't usually set out to benefit themselves. What drives them to that behaviour is often a fear or a blame culture. They're always covering up failure. They're always covering up loss and not wanting to be seen as a failure. That doesn’t necessarily equate to amoral anti-social behaviour.

Q. Rogue traders have happened throughout history and, despite years of regulatory fines and new regulatory rules and legislation, they still keep popping up. Do you think that there will always be bad people in every organisation who are impossible to weed out before it's too late?

A: On the subject of not being able to identify a rogue until it's too late, you ought to look at this from the point of view of risk culture. I think that a risk culture that springs from the interaction between risk/governance frameworks and the underlying organisational culture is very hard to penetrate. On the other hand, governance measures are clear. Your point about whether you can legislate against those things is true – people will find ways around governance checks and you cannot identify people who will subvert these mechanisms. That is, unless you really are on top of things and you can look into the culture more deeply (to see what they are really likely to be doing when your back is turned).

The Senior Managers and Certification Regime helps in this because it makes individuals more accountable. They are more responsible for keeping an eye on people. We don't yet know the extent to which it will help, but it ought to!

Q: What do you think about reporting rules and the use of surveillance?

A: It's difficult to systematise these rules by, for example, applying surveillance technology. The European Securities and Markets Authority is right to think that effective surveillance platforms are essential, but firms are finding it difficult. It's hard, not least because the gulf between the front office and surveillance systems is not insignificant. Putting the infrastructure in place is difficult technologically. It might take years.

Q: A book called 'Ethical Breakdowns' blames unethical behaviour, amongst other things, on ill-conceived goals, i.e. goals set to encourage positive behaviour that inadvertently reward bad behaviour. Can you give examples and say what firms are doing about it?

A: I'd put it in the context of – again – the relationship between an organisation's risk appetite and the way in which people are remunerated to take risk. And what the cultural attitude to risk is.

We use cultural appraisal/survey tools. There is one in particular, developed by Denison Consulting, that looks at the underlying organisational culture and how it's balanced. The theory is that a high-performing culture should be balanced between competing dimensions in the context of external versus internal focus. (A firm might, for example, focus its attention on external factors such as customers at the expense of internal factors such as its own performance, or vice versa.) Other things include the degree of flexibility and agility in an organisation set against rigour and governance and control. These factors are always in contention. You could have a young organisation that is extremely externally focused, and extremely flexible. This, however, is not sustainable in the long term.

The survey tool roves across 12 areas that inhabit four dimensions. The end product is a spiderweb diagram that shows whether the firm's culture is well-balanced or not and therefore helps you to probe those areas which are ‘out of kilter’ and therefore potential problem areas.

The first dimension is the firm's mission. We ask staff to fill in questionnaires that help us to find out whether the firm has a meaningful, long-term sense of direction. The three areas in this dimension are as follows.

• Strategic direction and intent. Do employees understand the organisation's strategies? Do they think they will work?

• Goals and objectives. Are short-term goals helping employees to link their day-to-day activities to the firm's overarching strategy in their minds?

• A vision of the future. Do employees understand the firm's hopes for the future and share a desire to make them come true? Are they motivated? Are they excited by the future?

The second dimension is consistency. This time the questions are designed to look for business systems that might form the basis of a good culture. The three areas in this dimension are as follows.

• Co-ordination and integration. Do employees from different parts of the organisation share a common perspective that allows them to work effectively across organisational boundaries?

• Agreement. Is the organisation able to reach agreement on crucial issues? Can employees reconcile their differences in a constructive way when problems arise?

• Important ideals and customs. Do employees share a set of ideals and customs? Are there leaders who reinforce those ideals and customs?

The third dimension is involvement. This time the questions are designed to look for instances where the firm makes people capable of doing better and imbues them with a sense of responsibility for various things. The three areas in this dimension are as follows.

• Capability development. Do employees believe that the firm is 'investing' in them, in the sense of spending time and money giving them extra skills? Do they believe that their skills are improving?

• Team orientation. Is teamwork encouraged AND practised in the organisation? Do employees think of collaboration as a good thing and feel mutually accountable for common goals?

• Empowerment. Do employees feel well-informed about the work they do? Do they think that they can have a positive effect on the organisation?

The fourth dimension is adaptability. The questions for this section are designed to work out whether the firm is translating the demands of the business environment into action. The three areas in this dimension are as follows.

• Creating change. Are employees reacting to trends and changes that happen outside the firm? Are they looking constantly for new and better ways to do their work?

• Customer focus. Does the firm have methods in place to help it understand the needs of its customers? Are employees determined to respond to the findings? Are they concentrating on the needs of customers? Is that a top priority throughout the organisation?

• Organisational learning. Do employees place importance on learning in the workplace? Are they making efforts to create an environment in which innovation occurs and people take reasonable risks? Do people share knowledge throughout the organisation?

* Peter Richardson can be reached on +44 (0) 207 024 7527 or at peter.richardson@protiviti.co.uk