A speech by Greg Medcraft, ASIC Chairman, discusses some important issues around corporate culture. Culture matters. Culture is at the heart of how an organisation and its staff think and behave. From the behaviour of the board, through senior management to the front line, he argues that organisations without a customer centric culture are likely to lose out to those who do.
Culture is a set of shared values or assumptions. It can be described as the underlying mindset of an organisation. It shapes and influences people’s attitudes and behaviours towards, for example, customers and compliance.
It has been said that ‘culture is the new black’. It is on the minds of governments, regulators, boards, senior executives, and customers globally.
ASIC is concerned about culture because it is a key driver of conduct within the financial services industry. By focusing more on culture, we expect to get early warning signs where things might be going wrong to help us disrupt bad behaviour before it happens and catch misconduct early. We also think it will help us with identifying not just individual instances of misconduct, but broader, more pervasive problems.
Poor culture often leads to poor outcomes for investors and consumers, impacts on the integrity of the Australian financial markets, and can erode investor and financial consumer trust and confidence.
We are at an exciting time in history, when technological innovation is rewriting almost every industry including the financial services industry.
Very recently, Max Levchin, PayPal co-founder and former chief technology officer, said that his new fintech start-up, Affirm – which offers flexible and fast loans and is pitched as an alternative to a credit card – could challenge global financial institutions with a new model designed to better align with customer interests. Regardless of whether this particular vision succeeds, it is evident that new disruptors will continue to challenge incumbents.
In a new Telstra report, Millennials, mobiles and money, it was stated that, ‘millennials may be the first generation to live their lives never requiring nor engaging with a traditional institution and only ever associating the word “branch” with a tree’.
Social licence, social media and the 24-hour news cycle are also changing customer expectations and the way customers behave.
The Telstra report says that ‘the threat from fintech is significant’. It notes that two-thirds of millennials prefer to receive advice on financial products and services via a digital platform, and that automated robo-advice or digital advice is perceived to be more independent and preferred.
In this environment, building and maintaining a culture that your customer can believe in is imperative. There are more choices and information available to customers now than there has ever been before. Firms that do not have a good culture risk losing their customers to firms that do.
We recognise that culture is not something that can be regulated with black letter law. We know that it isn’t feasible to check over every company’s shoulder to test its culture, or dictate how a business should be run.It is an issue that companies themselves must address. Boards and senior management play an important role in setting the ‘tone from the top’ for an organisation. Culture requires senior leaders to think carefully about how their actions and behaviours support and advance the firm’s desired culture.
At the end of the day, you need to have a culture that your customers can believe in. If your culture genuinely reflects ‘doing the right thing’, this will be rewarded with longevity, customer loyalty and a sustainable business.
