Survey: Culture key to avoiding regulatory problems

Half of the almost 300 finance professionals surveyed think that a company’s culture is the most important factor to get right in order to stay off the regulators’ radar

Senior finance executives say that building a “culture of compliance” is the best way to keep firms out of trouble.

More than half (53 percent) of the almost 300 finance professionals, including private fund managers, surveyed by regulatory consultants Kinetic Partners said that culture was the most important factor to get right in order to avoid regulatory problems.

“The message is clearly getting through to firms that compliance policies and procedures aren’t enough to satisfy the regulators. They are looking for evidence of a change in the culture of the organisations, which is blamed for the financial crisis,” said in a statement Monique Melis, global head of regulatory consulting for Kinetic Partners.

According to the survey fewer than one in ten (9 percent) polled put their faith in risk monitoring and compliance as the key factor to keep their firms out of trouble.

Jane Jarcho, the Securities and Exchange Commission’s (SEC) exam lieutenant has previously cited a culture of compliance as a key consideration when her team undertakes examinations. She said that compliance officers “need to be persistent” and stress to key decision makers that “good compliance is good business.”

Yet, despite finance professionals stressing the need to get compliance-savvy firm wide only 18 percent polled said they prioritize leadership and management skills when hiring compliance staff. Although, perhaps unsurprisingly technical knowledge of regulations was considered the most desirable trait by 44 percent of those surveyed.

“Often, it is the failure of a firm’s leadership to set clear expectations for the culture and related behaviours throughout the business that can have a more significant impact,” said Melis. “If companies want to foster a compliance culture and develop a true voice for governance in the board room, they need to invest in people who bring with them not just the technical knowledge of the regulations, but the skills to change attitudes and behaviours at every level of the business.”