While 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, finds a new Economist Intelligence Unit (EIU) report sponsored by CFA Institute.
Nearly all respondents to an EIU survey conducted for "A Crisis of Culture" 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: 53% think strict such codes damage competitiveness, and only 37% think it would have a positive financial impact.
“There is little doubt that financial services firms are trying to change their ways," says 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-fifths of survey respondents say gaps in employees’ knowledge pose a significant risk to their firm. Still, 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.