2020 – A Turning Point for Diversity in the Financial Sector?

The current debate around diversity and equality is one that the finance industry needs to pay close attention to. There have been significant movements in the debate over the past few weeks, including the Black Lives Matter protests around the world and the UK Government’s recently announced inquiry into ‘all aspects’ of racial inequality.

The financial world, in particular, needs to ensure that any action taken goes beyond paying lip service to what’s going on at the moment and do something instead that will instil real change throughout every working environment and day-to-day process. Failing to achieve this will allow systemic discrimination to hide within the structures of the sector and will ensure that we continue to see inequalities remain entrenched in the industry.

The current equality outlook

Earlier this year, the Financial Reporting Council (FRC) revealed that more than half of all FTSE 250 companies failed to mention ethnicity in their board diversity policy. In the review, the FRC stated explicitly that there was very minimal reporting on diversity overall and discussion around assessing or monitoring workplace cultures was severely lacking.

This points to the importance of taking a wide view of diversity and not accepting previously narrower definitions of what good practice looks like. The FRC’s review highlighted this, finding that any actions taken around diversity rarely extended beyond gender issues, with race, age, ability and LGBT+ diversity rarely being focused on.

Right now, we’re at a turning point in how we view diversity in the financial sector, making this an ideal opportunity to really set in stone what we want the future to look like.

The stats are equally as telling when it comes to gender, with the Financial Conduct Authority (FCA) discovering that only 17% of FCA approved individuals are women and that there’s been an increase in reports of discrimination and sexual harassment across the industry. Female representation rises slightly when looking only at senior roles in larger companies, but the number still falls short of a quarter of all higher-ranking positions.

While the stats are an improvement on where the industry used to be only a decade ago – gender diversity at senior management levels in major institutions grew from 9% in 2005 to 18% last year – there’s still a significant way to go before we come anywhere close to a 50/50 split.

Diversity creates better products and services and impacts the bottom line  

By all rights, there should be no barriers to creating more inclusive environments, as there are many

benefits to both employees and businesses of creating a diverse workforce. A frequently mentioned study is one carried out by the Boston Consulting Group, which found that diverse companies generate an average of 19% more revenue. This substantial increase was put down to the practical impact of diversity in a number of areas, such as fostering innovation, helping to win new business and attracting talent. This is by no means a solitary finding. Last year, a survey of 13,000 enterprises by the International Labour Organisation’s Bureau for Employers’ Activities found clear evidence that more diverse business cultures reaped the reward of higher profits.

And by and large, there appears to be little argument among the top level of the finance sector. According to a PwC survey of 410 financial service organisations, their CEOs overwhelmingly agreed that diversity brings direct benefits. The advantages that these CEOs acknowledged included enhanced business performance, improved innovation and enhanced customer satisfaction.

These leaders now need to start actively making these ideals a reality, as the FCA is going to start taking diversity into account when it assesses a firm in order to encourage healthier cultures. Under the new plans, anyone who holds a senior management function will need to be approved and will have to set out everything that they are responsible for, to create greater individual accountability and, hopefully, setting a higher standard of conduct. Diversity is therefore no longer just a ‘nice to have’, but is going to start being a fundamental principle of how financial businesses are run.

Creating the right culture

To overcome the issues facing the industry, each organisation within it needs to have a clear and unbiased understanding of their culture and its potential problem areas. Looking at the issues we’ve explored in this article and how they apply to an individual firm is a good way to start to gain a better picture of how diverse a firm is. For example, what’s the makeup of the board and does this differ to the other levels of the business? Is there an existing diversity policy and does it include all forms of discrimination? Are there processes in place for reporting misconduct and harassment?

One of the most fundamental ways that firms can start paying attention to diversity is ensuring everyone in the organisation feels heard and know that if they do face discrimination, they can do something about it. However, the recent move to a more online world creates a challenge here, as many of the issues of harassment or discrimination that lead to some either staying away from the industry or leaving it are now shifting to digital spaces. In this space, they can be more difficult to manage.

The anonymity that can come from sitting behind a screen can often lead to increased levels of bullying, whether from people who feel separated from the consequences of their words, or simply because people are unintentionally causing harm because they can’t see or properly understand the person they’re communicating with. Either way, if left unchecked in a workplace, this can lead to significant cultural issues that will fester if not properly addressed.

Many HR teams will already have reporting platforms in place to enable employees to safely report instances of discrimination and abuse – whether that’s online or in person. This can help track microaggressions and create a detailed picture of the company’s culture, which they can then use to improve on it. Without clear and safe reporting pathways, it’s very difficult to encourage people to speak up and so those problem areas will continue to remain hidden. More than this, organisations should not only signpost to these platforms but actively encourage employees to use them, with those that do speak out against bullying encouraged and supported for doing so, rather than perpetuating any stigma.

A turning point

Right now, we’re at a turning point in how we view diversity in the financial sector, making this an ideal opportunity to really set in stone what we want the future to look like. To work though, this new understanding of good practice needs to be represented at every level – from the regulations of governing bodies to the attitudes of business leaders, and the understanding of rights and reporting processes by employees. While this may seem like a big step for some, there’s never been more advice, experience, systems and support out there designed purely around changing the status quo and reshaping firms into more diverse and inclusive spaces that work for everyone.

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