The global workforce has been under pressure since March, when the lockdown started in most countries. Since then, the stress and financial pressure caused by COVID-19 and the uncertainty to industries, organizations and employees has increased. Governments and regulators are under pressure to deliver normality while reducing the economic and market impact of the crisis.
On top of that, regulators such as SEC, FCA and ESMA have warned firms that misconduct is being facilitated due to the home-working environment. Managers can no longer monitor closely and ensure staff are taking security measures with confidential information and customers details. The home-office environment notably increases the risk of misconduct and many companies lack on the monitoring of employee compliance. That's why regulators have been focusing on the importance of empowering employees to do the right thing.
Culture - The underlying beliefs, assumptions, values and ways of interacting that create collective attitudes and behaviours within an organisation.
Organization purpose - An aspirational reason for being beyond profit which inspires and serves as a call to action for all employees and stakeholders.
Culture and Organization are connected and considered the main drives of good and bad behaviour within organizations. Firms are expected to make efforts to cultivate a healthy culture where employees are empowered to stand up, speak up, and be accountable for their actions. Nevertheless, culture can start to dissolve due to the circumstances resulting from Covid-19. When working without supervision, employees are more likely to be influenced by "bad apples" and conduct risks are heightened.
In more mature teams, considering those who work together for a long period or know each other very well, the risks are considered smaller. Therefore, specialists warn that managers should look with more detail at teams with high turnover, new team members, and those in control of sensitive information. The FCA reported that formal processes and objectives cannot replace the sense of direction and ethical foundation that a healthy culture can provide. Employees need interaction with their colleagues, employers, and customers otherwise it can result in poor communication.
Managers are being increasingly challenged with new working circumstances as they struggle to manage their teams remotely and maintain compliance obligations . Managers had to rediscover ways to communicate and keep up to date with all projects and operations. By losing day to day informal contact, communication can become poor, leading to higher conduct risks.
Despite these difficulties, clear communication is an essential part of a culture of compliance. Leaders that create an open channel of communication have better results and are more likely to empower employees to speak up when an issue arises, better monitor conduct risks and manage conflicts of interests.
Additionally, managers can play another positive role in the company culture by stressing the organization purpose and working together to implement best practices to build a culture that focuses on ethical behaviour, accountability and meets regulatory criteria. The role of leaders during these times is not only to motivate, direct, and support the team, but also to achieve a culture of compliance. Leaders are expected to react when an issue is raised, listen to the team, respond to situations with a clear action plan and ensure organizational values and principles remain intact during difficult situations, such as the one we are experiencing now.
In order to protect the business and achieve long-term success, firms have to prioritise their people and culture. Regulators are issuing warnings so that organizations can take the opportunity to change for the better. The process of changing and improving culture is slow, but if firms start now they will become stronger in the future.
We have a on-demand webinar, presenting two conduct and culture specialists from the Mizen Group. During the webcast, they provide an overview of the latest regulatory update on conduct and culture and give advice on how you can improve the culture in your firm. You can watch the webcast here.