Have you considered Diversity and Inclusion within your business?

The below update has been issued by our Compliance and HR teams surrounding what businesses need to do to ensure they have a diverse workforce, in line with the FCA’s standards.

Diversity and inclusion are critical to the FCA’s work on culture and governance, particularly for boards and senior management. During July 2021, the FCA, Bank of England and the PRA jointly published the discussion paper DP21/2: Diversity and inclusion in the financial sector – working together to drive change.

To date, a sample of businesses has received two surveys to engage them in the discussion. The first survey was issued in November 2021 to establish the current levels of diversity. The second, sent in May 2022, was designed to evaluate the costs and benefits to firms of the policy concepts under consideration.

All businesses have work to do to create a truly diverse and inclusive organisation, but the FCA recognise the level involved will be proportionate to the size of the business.

What are the policy concepts under consideration?

Policy concepts relevant to all businesses include:

  • Individual Accountability – where Senior Managers have responsibility for diversity and inclusion, this would be included within their Statements of Responsibilities.
  • Fitness and Propriety – making non-financial misconduct a consideration during assessment.
  • Senior Managers Collective Suitability – how a Senior Manager appointment supports the diversity of thinking between key decision-makers, avoiding the risk of groupthink.
  • Threshold Conditions (the FCA’s minimum standards to become and remain authorised) – evidence of discriminatory practices within the existing ‘suitability’ (Threshold Condition 5) criteria.

Policy concepts relevant to businesses with 251+ employees (excluding limited scope SMCR firms) include:

  • Representative Boards – age, sex, ethnicity, disability etc. being in the board recruitment strategy and succession planning.
  • Risks & Controls – being able to recognise the business risk of inadequate diversity and inclusion.
  • Policies – the requirement of a Diversion and Inclusion Policy with minimum standards to include clear objectives/goals, a plan for meeting those goals, ways of measuring progress, and ways of promoting diversity on the Board.
  • Training – this would be non-prescriptive in nature, however, highlighting to staff the benefits of diversity and inclusion within the context of the firm.
  • Setting Targets – businesses decide what targets to set, although effective targets would need to be adequately stretched and include at least sex or gender, and ethnicity.
  • Data Disclosure – public disclosure of aggregated diversity data on their board, senior management population and employees, either annually or every two years.
    • Data Collection – collecting and submitting aggregated diversity and inclusion data to the FCA, via a new annual diversity and inclusion regulatory return, either annually or every two years.

The FCA recognise the financial sector has taken steps forward on diversity and inclusion but, there is much more that needs to be done to create a truly diverse and inclusive organisation that meets the diverse needs of those they serve.

A full consultation paper is planned for release during Q3 of 2022, with the full policy statement expected in 2023.

Want to know more about how joining Bravo Networks can give you access to full compliance support, so you don’t overlook anything important? Speak to Simon Bailey today on 07483 929 046 or email simon.bailey@bravo-group.co.uk

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