Keeping up with the customer

It is increasingly recognised that the culture of an organisation is fundamental to its ability to meet the needs of stakeholders, from customers to regulators to shareholders to employees.

On one level, we expect the makeup and structure of organisations to reflect the society in which they operate. Financial services firms are expected to meet these norms, for example, in terms of gender, ethnic and religious diversity, as well as being LGBT (lesbian, gay, bisexual and transgender) friendly. At the same time, organisations are also expected to meet new technological changes and adapt to new trends in customer demand in a fast-changing world. In this sense, the culture of a firm must be alert and responsive to new dynamics. Across the financial services sector, for instance, building a culture that understands cybersecurity risks, while also embracing the lessons from new entrants such as FinTech, is becoming critical.

Change is inevitable

But changing or just managing the culture of any organisation as large and complex as most global banks is a considerable undertaking. And in the current climate of higher regulatory costs, competitive pressures, lower growth forecasts and revenue levels from traditional sources, it is imperative for c-suite executives to maintain focus on long-term cultural issues, especially if a company has retained the same structure and organisational makeup over recent decades.

The culture stream at Sibos 2016 touched on many themes related to how the culture of financial institutions should evolve in line with the society around them, including gender diversity and inclusion, organisation and decision-making, and dealing with technological change. One recurring message echoed across these sessions: change is inevitable. Cultural issues leading up to the financial crisis are seen as a contributing cause. As well as regulatory reform, it was recognised that a change in culture was also needed to avoid a repeat.

“Since the financial crisis, we found that cultural change is perhaps one of the hardest things to do in an organisation,” said Kim Newell Chebator, head of global markets for EMEA at State Street. David Puth, CEO of CLS Bank, agreed, noting residual levels of mistrust due to the scandals that emerged in the aftermath of the financial crisis. “The industry recognises the need to change that perception through changes in conduct and in certain practices,” he told delegates in Wednesday’s session, ‘Behaviour and culture under the spotlight’.

The financial crisis also awakened the industry to the risks of a male-dominated culture at the top of many leading financial institutions, with a tendency toward groupthink that can leave many assumptions unchallenged. From a gender diversity perspective, despite the huge amount of research highlighting both the social and business benefits of having a diverse array of people at high level positions, there is still a widespread lack of female board members and directors.

Diverse talent pool

Mark McLane, head of diversity and inclusion at Barclays, said the financial crisis was a turning point. “We have to attract the best talent to compete. The client expectations of banks are changing and their decisions over who they do business with are being shaped by cultural expectations,” he told delegates on Tuesday in ‘Diversity and inclusion – The leaders’ perspective’. “For example, are you LGBT friendly? Do you market to women? We have to look more broadly at how we conduct business.”

On a wider scale there is still significant under-representation in banking of women and people from different ethnic and religious backgrounds. Tinna Nielsen, a behavioural economist and an expert on unconscious bias, believes a fear of disrupting the status quo has been a factor in the continuing lack of women in leadership roles.

“Our unconscious mind operates on survival mode. We seek out people who are similar to ourselves, because it is safe and therefore maintains the status quo,” said Nielsen, founder of Move the Elephant for Inclusiveness, in a presentation on encouraging inclusive behaviour. “On some levels we are tribal people, we feel more comfortable to be with those that resemble ourselves.”

Despite the lack of overall progress, there is now increasing recognition amongst leaders of financial institutions on the benefits of diversity, with more initiatives to bring a more diverse set of people into leadership roles as part of wider efforts to change banking culture.

Jennifer Boussuge, head of global transaction services, EMEA, at Bank of America Merrill Lynch, highlighted that over half of the bank’s global workforce is female, 38% of its leaders are women, and six of its 14 board members are female. Speakers agreed that change had to be led from the top. Chebator said there was no single method for assessing a bank’s culture, but noted three criteria in use at State Street.

“One is the tone from the top, how is the leader – and the people that make up the board of directors – portraying the firm’s culture?” she explained. “Second, are executives and senior management taking personal accountability? Third, is there evidence that change occurred from debate, and have a diverse set of opinions and voices been heard?”

Sharing experience

When it comes to ensuring the efficient delivery of valued services to customers, a change in the status quo – in terms of how of how resources, processes and systems are deployed – is becoming vital for banks looking to keep up with new demands and threats. In ‘Building a culture of security’, panellists discussed how banks are increasing employee understanding of cyber security threats through testing and sharing experience.

“We are considering a number of methods to test our culture. One approach is to hire someone to work for 18 months to get an outsider’s view. This requires us to put a number of safety mechanisms in place to protect that individual, but there is real value is in the discussions and stories that result from the experience,” said Martijn Dekker, chief information security officer at ABN Amro.

Like inclusivity, building a culture of security is also a top-down process, according to cybersecurity expert Assaf Egozi, also entrepreneur in residence at Eggsplore, a Brussels-based FinTech ecosystem. “Implementing a culture of security can’t just be done with a small security team. You have to talk with the c-suite and individual departments about how they think about cybersecurity and the level at which they engage in the security process. You then have to look at entire organisation to understand how it behaves,” said Egozi.

Banks also need to embrace a new generation of staff as they compete to provide services in a market redefined by the digital user experience. With the arrival of new FinTech firms that are smaller, less structured and thus more able to adapt to changing customer experience trends, it has become vital for banks to harness these new technologies and attract millennials.

“The generation of people that will be operating the systems will be millennials, we need to accept this as part of day-to-day operations and leverage their skills,” said Stephen Bayly, CIO at HSBC’s securities services business, in the session titled ‘Digital disruption in securities services: fear and courage’. “It is not just a matter of employing millennials, it is about looking at a change in cultural norms in order to generate new ideas and provide a competitive stimulus.”

The diversity of the topics discussed in the culture stream at Sibos 2016 is a reflection of the range of changes taking place in society as well as in the financial services market. The structure, organisation and above all culture of banks and other institutions must be able to take account of these shifts. Those unable to embrace change risk being left behind.

You can watch recordings from the 2016 Culture stream on YouTube and sibos.com .