Financial services firms are taking steps to improve their record on ethical conduct, basic tensions in how the industry works make long-term change a distant goal, a report by the Economist Intelligence Unit (EIU) report and sponsored by the non-profit CFA Institute suggests.
Among the findings of the report, entitles ‘A crisis of culture’, are the following:
- Fifty-three per cent of financial services executives polled say adhering to ethical standards inhibits career progression at their firm.
- A similar number also say strict codes of conduct would harm their firm’s competitiveness.
- Forty-three per cent have had to introduce incentives to encourage ethical conduct
However nearly all respondents (96%) to the survey conducted for the report champion the importance of ethical conduct in the financial services industry. But industry executives struggle to see the benefits that greater adherence to ethical standards would bring to their firm: while 53% think strict such codes damage competitiveness, only 37% think it would have a positive financial impact.
“There is little doubt that financial services firms are trying to change their ways,” said Sara Mosavi, editor of the report. “But the jury is still out on how successfully they will be in rebuilding their culture. Some of the pressures firms faced before the financial crisis, such as quarterly reporting requirements and pleasing short-term investors, won’t go away any time soon.
“The question then is whether the industry’s top echelons are doing enough to risk-proof their firm and better serve their clients.”
As well as recognising ethical conduct to be crucial to improving their firm’s resilience to further shocks, financial services executives also point to improved knowledge as critical to their risk-proofing efforts. Three in five survey respondents say gaps in employees’ knowledge pose a significant risk to their firm, although 62% say employees don’t know what is going on in other departments at their firm.
Also, despite the ongoing globalisation of the regulatory framework governing the industry, only 12% say they are confident in their knowledge of the global regulatory environment.
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