TCC, the British compliance consultancy, has appointed former FCA culture specialist Olivia Fahy to lead the charge as its Head of Culture. In this article we interview her about this large subject.

Even though compliance officers are taking an increasing hands-on approach to business culture, many businesses are still struggling to monitor theirs satisfactorily. Olivia Fahy's task is, in TCC's words, "to help businesses unlock their cultural DNA." The interview is in the nature of a question-and-answer session.

Q: Do the FCA's rules mention the word 'culture'?

A: No, and the FCA has always been clear that they're not planning on writing specific rules for culture. It's up to each organisation to do it on its own! The aim is to make sure that it is never a tick-box exercise. The FCA sees this as a chance for firms to change their cultures.

There are no rules that relate to it. The regulator's cultural ideas are most clearly expressed in the Senior Managers and Certification Regime (SM&CR). According to this, there are five individual conduct rules to be found in COCON, the conduct part of the FCA rulebook. Staff must act with integrity, skill and diligence, they must be open with regulators, treat customers fairly and observe proper standards of market conduct. Firms have to train their staff in this regard and, indeed, the SM&CR regime encourages staff to push back against their managers whenever they see injustice. There are also some conduct rules that apply to senior managers as part of the SM&CR.

Q: That's culture that has a bearing on a firm's internal affairs. What about external?

A: Yes, there are obligations for a firm to be a good market participant. The principles for business – the PRIN part of the FCA's rulebook – contain some of these.

Q: Where is the best regulatory definition of 'culture' to be found?

A: The FCA published its culture main page in 2015. Then in 2018 came its culture discussion paper 18/2, entitled "Transforming culture in financial services," with Jonathan Davidson's foreword. It defines culture as "the habitual behaviours and mindsets that characterise an organisation."

Q: What did you do at the FCA?

A: I worked on their culture team. I developed and led the FCAs' "transforming culture" initiative. It was a cross-sector job and I was one step above the task of visiting firms. I provided thought leadership in helping firms develop initiatives. A firm's purpose, psychological safety, leadership, how the firm should view culture...these were the things that we focused on. Culture can be a driver of risk or a mitigator of risk.

Q: What is psychological safety?

A: Amy Edmondson of Harvard did the research. It's the freedom to express an opinion in the workplace without fear of punishment. It was not well known when we started in 2018. When I joined the FCA five years ago, the tone at the top and remuneration were the focus. Psychological safety is linked to inclusion and an inclusive culture. It's being able to be yourself.

Diversity and inclusion are linked. Women think differently to men, which is good because the aim is to have diversity of thought.

Q: Where does the 'purpose' of a firm fit in?

A: Purpose is up there too. It's come to the fore in the last couple of years. There was a discussion paper (DP20/1) last year which was all about driving purposeful cultures in financial services. It's all about what the firm is trying to achieve. Research says that firms have a purpose beyond making money. Employees, for instance, want to work for firms with sustainable business practices. Or they might want to work for ESG-friendly firms. Shareholders want that as well, especially if they are doing some "impact investing."

Q: You use the word 'drive' a lot. What does it mean?

A: It means 'cause.' It's a relic from the FCA, which uses it. Its "four drivers of culture," sometimes called the "four drivers of behaviour," are purpose, governance (how people at a firm make decisions), leadership and the firm's approach to people (an internal factor).

[Editor's note: Mark Teasdale of the FCA says that "people policies" include the types of behaviour that are incentivised or disincentivised at a firm and the way in which the firm does this. This most obviously includes remuneration, but also extends to promotion, recruitment, diversity and inclusion, "speak-up culture" and psychological safety.]

Q: How many banks have a head of culture?

A: Some do. I have no figures, but heads of culture exist. It's increasing as a role.

Q: Do people in the FCA's enforcement department have to pay attention to a firm's culture?

A: In terms of enforcement (where I have never worked), a firm's culture might drive behaviour, but there's no enforcing culture.

Q: What are you doing at TCC?

A: At TCC the role involves particularly the measurement of culture. I've joined to spearhead the development of a culture enforcement solution – it's called Hemisphere. It's a tool that uses organisational network analysis, data analytics and employee insights. It's based around the four drivers.

Q: The FCA has long had a predilection for airing its views about "good practice" and "bad practice" whenever it reports on a thematic review or puts out a policy statement. It doesn't relate these views directly to any rules, so they aren't enforceable edicts. Why does it bother to do it?

A: The FCA regulates such a broad multitude of firms, it's very difficult to say what firms should be doing. It might be different for every firm. If you printed out the FCA rulebook it would be six feet tall – in fact it might even be taller. There's so much fear of falling foul of the rules, firms might lose sight of what they should be doing.

* Olivia Fahy can be reached at hello@tcc.group