Series Eight, Episode Five: The regulator’s view: The FCA’s expectations and commitment to diversity & inclusion

Julia: Hello, my name is Julia Streets, and welcome to DiverCity Podcast, talking about equality, inclusion, and diversity in financial services. On the podcast we seek to shine a light on positive progress, call out areas requiring further focus and offer lots of ideas to help drive change.

Today I’m joined by Georgina Philippou. Georgina is the Chief Operating Officer and a member of the Executive Committee at the Financial Conduct Authority, known by many as the FCA. Georgina was appointed COO to the FCA in 2015, and she is the Accountable Executive for the Women in Finance Charter, to which the FCA signed up in 2016. She has held many senior tenures which have included acting Director of Enforcement and Market Oversight, Director of Strategy and Delivery in the Enforcement and Financial Crime Division, and for some eight years Georgina chaired for the Committee on Enforcement and the Exchange of Information, as well as its screening group at IOSCO, the International Organisation of Securities Commissions.

Georgina chairs the Executive Operations Committee with wide reaching responsibilities for monitoring the FCA’s use of resources. For risk management, its operating platform of resilience, and a relevance to today’s discussion: people and culture. It is perhaps not surprising therefore, that she also chairs the FCA’s Executive Diversity Committee, and we’re delighted that she joins us to share her insights, experiences, and perspectives. Now it would take more than a lockdown to stop DiverCity Podcast from talking about the importance of D&I, and in this episode we’re recording this remotely. I should flag that the sound quality does wobble a little on occasion, however, in my opinion, it simply does not deflect from the rigour nor the tenor of the discussion with Georgina today.

Georgina, it’s a pleasure to have you on the show. Thank you so much for joining us. 2020, what’s your main focus for this year been, and has that changed since COVID?

Georgina: Thank you very much for inviting me. I’m really happy to be here talking about diversity and inclusion. 2020 has been a mixture of carrying on old strategic initiatives and introducing new ones. We’ve got very active programmes that work on all of these protective characteristics, plus social mobility at the FCA. Our three main strategic priority areas, which continue right until this year are ethnicity, gender, and social mobility. Looking externally, we continue to look at what we can do under our public sector equality duty to encourage and promote diversity and inclusion right across financial services. Of course the recent horrible events in the US with the death of George Floyd have given us a lot to think about on top of that. We are listening to our black colleagues at the FCA and we’re working up a series of actions to further progress our D&I strategy.

Julia: Wonderful, thank you. I know we’re going to come back to the question of the Race At Work Charter, that comes up later on. I know you’ve got some very clear targets as well on that, so we’ll come back to that for sure. Thank you very much, that’s very helpful. I’d like to understand if anything changed of late in terms of the impact of COVID or anything looking back, or was it very much focused on those three key areas and continuing the programme of work?

Georgina: Yes, the strategic priorities continue, but of course the context, the present context has changed. We’re very aware of the fact that COVID has had a great impact on the BAME community, and we’re working to support our own employees through that at the FCA. 26% of our workforce is BAME, so this is something which is very close to home for us as an organisation. The COVID crisis has meant that our focus has moved to inclusion. For everyone, there’s been a huge focus on mental and physical wellbeing. For example, we have a mental health month for the whole of May, rather than just the Mental Health Week, because we know that mental health is so important at the moment. We had senior leadership engagement, we had webinars, we had a full calendar of events which we’re going to continue indefinitely, and we’ve produced tool kits on what can you include for these online managers.

We’ve also done a survey of all of our staff to understand what their issues and challenges are when working remotely so that all of that information can help shape the supportive strategies as well. We’ve learned an awful lot from that, which we’re feeding into our strategies.

Julia: The FCA regulates and supervises the conduct of 50,000 firms in the UK, all of which are providing financial services and products to the UK and its central customers as well. I think about the leadership position that you take in the industry as well. What guidance do you give to your membership firms, if you can call them that, are there rules? Is there guidance that the industry should follow?

Georgina: Yes, 50,000 firms, about 100,000 individuals as well. We’ve said, for a very long time, that we think there are two key drivers of a healthy financial services sector. These two key drivers are number one, business model, and number two, culture. We have also said that a healthy culture is one which is purposeful and safe for employees to speak up. This means a listening culture where inviting diverse ideas and diverse views can lead to earlier identification of issues and more innovative solutions for those issues, whether it’s a sense of collective ownership, a sense of team spirit, that the actions and behaviours of the firm, and where people don’t fear being punished or ignored if they speak up. Research and studies support this view, they show that diversity has a positive impact on the bottom line, because robust decision making comes from challenge, and to get challenge, you have to have different voices around the table.

It sounds simple to say, but can be really difficult to put into practise. That’s where we can come in as a regulator. We’ve been engaging with regulated firms and talking to them about why, what we call non-financial misconduct, matters in terms of culture. For example, we sent a letter to a wholesale insurance firm, earlier in this year, which was about non-financial misconduct. The key point we made in that lesson was, number one, non-financial misconduct is wrong. It creates an unhealthy culture, and while it might not be a breach of any of our specific rules, perpetrating or allowing non financial misconduct can show that an organisation has a poor culture, or that an individual is not fit and proper to be employed in financial services.

The Senior Manager Regime plays an important part in all of this. It means that we approve Senior Managers who are performing critical roles in the firms we regulate, and it allows us to consider as part of that process, non-financial conduct, including the approach to diversity and inclusion. For example, we ask questions about whether forms are signed off, the layer behind that is that firms have to certify that other key staff are fit and proper, and we expect firms to take the same kind of approach. What all of this means is that senior leaders are responsible for the culture in their firm, and the behaviour of their employees, and there isn’t any escaping that.

Julia: There’s a fascinating discussion in there. I’m delighted you mentioned the Senior Manager Regime because I think this comes up more and more about, the responsibility for culture is very much sitting on the shoulders of our leadership teams, and being able to have a call-out culture. Are you seeing that organisations are really stepping up to that, or is your opinion that it’s still one of those areas where perhaps people haven’t cottoned on to how accountable they are?

Georgina: I think for the financial services industry, it still needs to work to build a reputation that was seriously damaged during the financial crisis. Every mis-selling scandal that you might read about, or any other kind of misconduct reminds everyone that there’s still some way to go, particularly in some firms or in some sectors which are sullying the industry for all the firms and sectors where culture and behaviours are taken seriously. We are seeing some really good behaviours, but not right across the board. The introduction of the Senior Managers Regime, which is being extended across more financial services sectors, shows that expectations remain high. This is clearly very important, but what makes it really exciting is that this is an area where regulators and industries can work together to define what good looks like, and discuss how to embed positive culture and how to measure it.

It isn’t an area that lends itself to hard and fast rules, but it is an area where dialogue, especially among senior leaders who set the tone, is crucially important. No one is saying that this is easy, the financial services industry, and the regulation in our industry, which for many years, for example, have been undiverse. But the current crisis gives us an opportunity. We’re all thinking about how we can come out of the crisis, and we’re all thinking about what the new normal after the crisis could look like. This is a really good time to take a good, hard look at our systems and processes and behaviours, and make something positive come out of this experience. We’ve talked so far quite a bit about the Senior Managers Regime, but industry codes of conduct and corporate governance codes are also recognising the importance of culture and the role that diversity and inclusion can play in a positive culture. This isn’t going to go away anytime soon.

Julia: I know this is something that as an organisation, the FCA is focused on very clearly, and I was reading your 2020 vision and equality objectives, and what really struck me is there are four key areas that the FCA focuses on. One of them is reflecting the society we serve, the second being inclusive culture, third leading by example, and the fourth being consumer focus. This is one of the discussions we have a lot on the podcast, which is thinking about the society and the consumers that the industry serves as well. I’d love to hear more about how you’re addressing that actually as an organisation, how the FCA tackles its diversity and inclusion initiatives internally.

Georgina: There are parallels with the way that we look at this internally, and the way that we look at this externally as well, in that both internally and externally, it’s got to start with personal accountability immediately. The way that we demonstrate that at the FCA, well, there are many ways. A key part of it is that we have an Executive Diversity Committee, which I chair, and that committee holds each of our ExCo members to account on diversity and inclusion in their division. The committee asks each ExCo member some very tough questions about what their strategies are, whether there is diversity, describe the positive action framework, describe how you take personal accountability. That’s one thing immediately. Each member of our senior leadership team, and all of our heads of departments, all of our directors, all of our people managers have a shared objective to promote diversity and inclusion. That is measured on an ongoing basis.

It is a factor that is taken into account in appraisal, and that is taken into account in measuring and attributing reward. That is another key thing that we’re doing. Other things that we have done, we’ve run a “This is Me” campaign where we focused on intersectionality. The purpose of that campaign was to encourage colleagues to tell their stories, to bring their whole selves to work, and encourage conversations in the organisation about people’s life experiences. We’re on the second cohort of our BAME Sponsorship Programme, and we have a hugely impactful BAME Reverse Mentoring Scheme.

Again, that is another opportunity for senior leaders to show that they are committed to diversity and inclusion and to show that they are ready to listen and learn, because there isn’t an easy fix. More recently, in the last couple of weeks, in fact, we’ve launched our D&I recognition award, and we’re now profiling the winners of those awards on our intranet. Those winners are colleagues from all levels and all parts of the organisation. And for me, what those awards show, is that anyone doing any job in the FCA at any level, can do something to contribute to D&I. Whether that is about making speeches or encouraging conversations or making suggestions for improving systems and processes. To bring this thing up to date, we had a really great session last week with our Parents and Carers Network on the challenges of being a carer, particularly in the current climate, and to highlight the support that’s available to carers.

Julia: It’s fascinating, isn’t it? Because while you were talking earlier about culture, my mind was going to, “What sort of things can you do to change behaviour, to embed culture?” Of course that’s rich with lots of really practical examples. So thank you for those. The other thing that we always think about is impact. I know the FCA has been working very hard on this, and if I’ve got this right, 45% of your management team are female, but I gather you’re working hard to improve on that. Can you tell us a bit more about that?

Georgina: Yes, we have a target of 45% of our senior leadership team to identify as female by 2020, so this year. And 50% of our senior leadership team who identify as female by 2025. This started back in June, 2016. We were among the first organisations to sign the Women in Finance Charter, which as you know, seeks to increase representation of women in the financial services sector, especially at senior level. It was shortly after that, that we set ourselves targets. We felt that was important in terms of focusing the mind on an area that is very challenging. There were major figures, so for the 30th of September 2019, shows up 41% of our senior leadership team identifies as female.

At present, we haven’t met our 2020 gender target of 45%. We knew that it was going to be challenging to reach the target of 45%, and as you have heard, we’re taking positive action and we are disappointed not to have met the target. We have a relatively low turnover, and we don’t have a large number of new posts at our senior leadership team level. That’s why we haven’t been able to meet that target, yet we’ll continue with our positive action programme and the full range of actions that we’re taking in order to ensure that we get close to our targets, meet our targets, and exceed our targets.

Julia: It’s wonderful to hear you talk about targets. It’s fascinating because over the course of all these episodes of DiverCity Podcast, we talk to many people, and when we’re in a state of growth, it is very easy, one could argue, to hit your diversity and inclusion targets because organisations are actively hiring. Of course, where we are now is we’re heading into a very real economic decline. So to hear you talk about an ongoing commitment to hitting those targets and a continued pathway to reach them is incredibly encouraging. Also, within that is the conversation regarding race. I know you’ve got some very clear targets in there as well. Love to hear more about that.

Georgina: Our BAME targets are also deliberately ambitious. We want 8% of the FCA Senior Leadership Team to identify as BAME by 2020, and 13% by 2025. As of the 30th of September, 9% of our SLT identify as BAME. So we have, by a small margin, exceeded our target. Now that’s great, but I don’t think we can afford to rest on our laurels. Once again, we have relatively low turnover rates, we have a relatively small Senior Leadership Team, and relatively few BAME colleagues. There is a risk that that number could go the other way, unless we maintain our actions and strategies. Our actions focus on recruitment from early stage career, right through to senior hires. They focus on work allocation and role modelling. We’re now on the second cohort of our BAME Sponsorship Programme. And as I’ve said, we’ve also introduced a BAME Reverse Mentoring Scheme, which is proving hugely impactful.

Last year we signed the Race at Work Charter, and we published our ethnicity pay gap, and we’ll be doing the same again this year. You’ll have done your research, you will know that our BAME pay gap in 2019 was 28.7% median, and 27.2% mean, which distinctly proves that we cannot rest. We have to keep going. It identifies that the pay gap isn’t really about equal pay for equal work, but what it shows me is that we have too many BAME colleagues in relatively junior positions, and we need to think very hard about how we allow those colleagues to thrive and to progress through the organisation and translate the diversity that we have at a relatively junior level, into true diversity at senior levels too.

Julia: Georgina you touched on this a little bit earlier. I’d love to come back to it, around the topic of race, and some deep-seated concerns about societal, individual, and institutional racism. I’d love to hear the FCA’s attitude towards tolerance, or likely non-tolerance towards racism.

Georgina: The most important thing to say up front is that we condemn racism in any form in our own organisation or in the firms that we regulate. It feels to me as though the call to action is even louder now than it might have been before. We’ve taken all the proactive steps that I’ve described in our conversation, and we’re using the strength of feeling about the death of George Floyd and what has happened since, to have some really difficult conversations, which begin by understanding the lived experiences of our BAME colleagues, but which must end in action. We’re asking ourselves difficult questions, such as why, despite our positive action framework, we still have a pay gap. Whether our targets for BAME representation at the senior leadership team level are set at the right level. Whether we target lower down the organisation, and so on. We’ll continue to have difficult conversations with firms about culture, not being put off by the fact that there’s no easy answer to the culture question, followed by the fact that you can’t formulate rules which will fix the challenges around diversity and inclusion.

Julia: Georgina, earlier you were mentioning the importance of intersectionality. We talk about intersectionality in the context of different networks coming together, recognising that people have multidimensional lives in many ways. Also, we hear a lot of people on the show talk about the importance and the power of networks as well, encouraging people to have conversations about promoting awareness and also tolerance, going back to your previous comments as well. Love to hear about some of the networks of the FCA and how these extend out also into the industry, if indeed that is the case.

Georgina: We have eight network groups in the FCA, and they represent gender, race, social mobility, disability, carers, faith and belief, sexual orientation, and gender identity. We have a newer network group for our international colleagues. They’re really important. They support our diversity and inclusion agenda by providing subject matter expertise, by providing insights around differences and lived experiences, as well as by providing a platform for engagement. On the intersectionality point, they are working increasingly in a collaborative way with each other to take that intersectional approach. We’ve established, for example, the BAME Women’s Group, and they are incredibly important. They matter because they create safe spaces to speak, and they provide support and challenge to the leadership. In that way, they are the foundation stone of any diversity and inclusion strategy. You asked about firms, and when I speak to firms, I find that the ones that are strongest on diversity and inclusion have very active network groups that are positively listened to by the senior leadership teams.

Julia: Wonderful. One of the fascinating aspects is that a lot of people would define their culture also by their environment and their location and how they bring people together, and then accessibility. Of course, these are fascinating times where, having recently moved into an office, I’m really intrigued to hear your thoughts about what considerations went into the building, actually as a physical space, in order to be inclusive for everybody. But also what you’re thinking about as the future of work is going to evolve in a very different shape.

Georgina: Our mission sets out that we’re here to protect consumers of financial services. We’re very aware that in order to do that properly, we need to reflect all of society, because we protect all consumers of financial services in the UK. Arguably, that’s even more important now that we’re based in Stratford, which is in one of the most diverse and most challenged, and I would say creative and vibrant, communities in the UK. For those reasons, social mobility has become the newest of our three pillars in our D&I strategy. It’s arguably the most challenging, perhaps because it is new, but mostly because it can be difficult to fight inequality. It can be about micro behaviours, which can be more difficult to call out. I don’t think we’ve developed as a vocabulary yet, for how we talk about social mobility and social diversity.

We’re taking some important first steps, the network has been focusing on getting itself together, increasing its memberships, making its existence known in the organisation. Equally importantly, they’ve been focused on capturing data, and we’ve been working with The Bridge Group in a research project into the impact of social mobility on D&I in our sector, so internally and externally. Without data, you are nothing in terms of D&I strategy, you need to understand the challenge that you have, and you need to be able to measure whether any of your actions are having a positive impact. That’s why data is important. What we want to see in terms of social mobility is more diverse hiring from a social mobility perspective, and a greater understanding of the impact of social mobility on career progression at the FCA. It’s in its early days, but we’re delighted already to be ranked in the top of the social mobility index, and this gives us the impetus to continue our work.

Julia: Of course, now we’re thinking about how are you adjusting your structures, your working models, etc, to make sure that actually even if everybody’s working remotely, they’re all very much working in an inclusive way.

Georgina: It’s a wonderful building that’s lying empty at the moment. It was designed with accessibility and wellbeing in mind so that the workspace is more flexible with better quality and more adaptable furniture with better natural light. It sits in the middle of a more open and natural outside environment, it’s slap bang next to the Olympic Park. It has a better air cooling system, we’ve got height-adjustable desks, which allow colleagues better comfort and customisation of their working environment. As a direct consequence of which we’ve seen a significant reduction in requests for individual workplace adjustments. The layout and colour scheme have been designed for our colleagues who are neurodiverse, or who are visually impaired, and we have some very smart gender-neutral toilets. In order to design all of that, we worked really closely with many of our networks, and in particular, we’ve embraced our Disability Network Group in the building design. With their help, we won the Workplace Adjustments of the Year Award in 2019 from the Business Disability Forum.

Julia: Really interesting to hear you talk about the building. I’ve been into the building, it is a stunning building in Stratford, and quite often people think about how you adapt physical spaces. It’s about making adjustments and making concessions, but actually the way you describe it is about making enhancements and making improvements to working environments. Also, as you say, when people are working at home, is to be very practically minded that you could be improving work enormously if you just take this opportunity to think very differently.

This set me thinking quite a lot, and one of the thoughts I’ve been asking all our guests in this season, particularly where we are, not only in terms of pandemic, but also thinking about what we’re heading into economically as well, is I’m quite deeply concerned that actually, as we head into tough economic times, there’s a risk that diversity and inclusion could fall down, or worse, off, the corporate agenda. I’d love your thoughts on why you believe it should stay high, and then also the FCA’s expectations on firms to demonstrate that they are very much committed to it. I’d love your thoughts on that.

Georgina: I think diversity and inclusion will always be at the top of our agenda internally and externally, but it’s challenging. We know that in times of operational and financial stress, it can be tempting to cut corners or to take risks. It can be easy to focus on the adrenaline rush of crisis management and ignore the importance of continuing to focus on culture and behaviours. Especially when, as a leader, you can’t physically see your employees and colleagues. How do you define how things are done around here, which is the commonly accepted definition of culture, how do you define how things are done around here when there isn’t a here? How do you know what kind of shadow you are casting as a leader if we’re all sitting separately in our own kitchens and bedrooms and studies? One thing we do know is that when stress goes off at an individual or at a corporate level, then conduct risk goes up too.

I think it’s important for all of us to be mindful of this, and for firms to pay particular attention to their own operational resilience and the way that they are treating their customer base. The number and types of vulnerable consumers have increased during the crisis, and firms need to respond to the immediate needs and the longer-term needs of those consumers. You can see how we have tried to encourage that in the various measures that we’ve asked firms to put into place, for example, around extending payment terms or providing payment holidays, preventing repossession, extending overdraft facilities, and ensuring that insurance policies offer proper value, for example. It’s been sad to see that some organisations have stepped back their internships and other programmes which help young people at the start of their careers. I’m pleased to say that we haven’t done this. We recognise that this is a particularly challenging time for young people. We have turned our graduate team, our internship, all of our early career initiatives into virtual offerings, that they are still there.

Those are just some examples of the very real risk that the health crisis and the economic downtown together undo years of progress and culture and behaviour and in diversity and inclusion. I think our role as a regulator is to do what we can to ensure that the culture of a firm doesn’t take a step backwards. This includes working with firms to ensure that culture doesn’t take a step backward.

Julia: I’d love to hear your thoughts as we wrap up the show. It’s extraordinary to me how time disappears on this podcast. As you do look ahead, and you think about all of the initiatives you have put into place and the impact that they’re having, the reality of the world today, and then also the pathway ahead, is what are you particularly optimistic about?

Georgina: I am hopeful that we learn what we can from the crisis, and that we bottle up the good things that we have learned, especially around authentic leadership and the importance of inclusion, and that we carry them into the new normal, or whatever the new normal looks like, and whenever it comes. I think that the COVID crisis gives us a unique opportunity to think about what we want the office to look like, by which I mean what we want our behaviours to be once we’re back in steady state.

Julia: Georgina, it’s been the most wonderful conversation. I know how busy you are, and we’re incredibly grateful that you’ve taken the time to record. This is recorded during lockdown, so to all our listeners, I think, as always, if there’s been a little bit of interference on the line, it is just the working reality. But it’s important to keep the conversation going, and Georgina Philippou from the FCA, thank you so much for joining us today.

Georgina: Thank you, it was a pleasure.

Kieron: This episode of the DiverCity Podcast was produced by me, Kieron Yates, on behalf of Julia Streets Productions. You can find out more about the guests on this week’s show on our website, divercitypodcast.com. Whilst you are there, you can also sign up to our newsletter for all our latest updates.

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