A good culture should not only be good on paper – it should work for, and be felt by, everyone.
Financial institutions and Regulators in Australia are talking about culture and more specifically risk culture.
Around the world, the issue of corporate culture is receiving increased regulatory attention as a foundation of good governance. As a result, the issue has arguably never been as high up the business agenda as it is today.
Recently, the Australian Prudential Regulatory Authority (APRA) has mandated board responsibility for risk culture. The Australian Securities and Investments Commission (ASIC) has also called for greater civil penalties for executives responsible for poor culture. But it’s not just an issue being focused on at the regulatory level in Australia.
In the UK, the Financial Reporting Council (FRC) is encouraging companies to focus on broader aspects of governance such as culture and strategy, while the Financial Conduct Authority (FCA) also encourages companies to make sure their culture supports a strong control environment. Japan’s Financial Services Agency recently published a new code of governance for audit firms encouraging them to ‘develop an organisational culture of openness’. New Zealand Stock Exchange (NSX) is preparing a revised Corporate Governance Code and its Financial Market Authority (FMA), in a report published this year emphasised the importance of boards and senior teams leading company culture. The Securities Exchange Board of India, in recent guidelines on board evaluation, has recommended that boards set a corporate culture and values which should be followed by the company. In South Africa, King IV governance codes released in 2016 set out the importance of an ethical culture as part of effective governance.
In our report Beyond Compliance – the building blocks for corporate culture, we set out practical recommendations for boards to consider, so they can play an even more effective role in fostering a successful culture today and in the future.
After all, regulators cannot develop corporate culture. Culture can only be authentic – and sustainable – if it comes from within.
To achieve a strong corporate culture and risk culture Grant Thornton recommends:
Conduct a culture audit or assessment
Set a code of conduct
Create open channels of communication for culture to flow
Use Real life examples of how things should be done in tackling business issues
Factor culture into ongoing risk governance – conduct of senior management teams is an important driver
Ensure cultural alignment with key stakeholders – Not just internally. Include customers, shareholders and suppliers
Refine and improve culture
Develop strong relationships between board & senior management – see how culture plays in the things they do every day.
Explore ways to boost the diversity of your board – diversity is not just a “nice to have” – it directly improves decision making and how senior teams deal with risk.
Set targets – make culture an actionable corporate objective. Embedding the culture in the middle & lower tiers of the business is a challenge for boards and does not take place to the extent that it should.
Focus on the future as well as the present – is your culture right and sustainable for your future? If the answer is no, what do you need to do to change your culture to align with the future you seek ?