|In a recent article posted on website of the UK’s Banking Standards Board, Hermes Investment Management CEO Saker Nusseibeh reflected on culture in the financial sector. He describes the Financial Crisis as a defining event and warned that we must not forget the lessons learned during this time. (Notably, most now working in finance were not in the industry at the time of the Crisis.)|
Nusseibeh goes on to explain the role poor culture played in this Crisis:
“[The] central cause of the financial crisis was poor culture. A culture in which people were incentivised to increase risk, not manage it. A culture where client outcomes were secondary to personal outcomes. A culture where effective oversight was a chore, not an imperative. A culture where employees could not bring their whole selves to work, creating discontent and impacting effectiveness. A culture that paid lip service to diversity, but did not embrace it, leading to group think.”
Nusseibeh points out that this isn’t an issue exclusive to the banking sector, and contends that organizations must continue to review the way they operate and hold themselves to higher standards in order to ensure good outcomes for their customers, shareholders and other stakeholders.
Asset managers have a responsibility to those that trust them with capital, Nusseibeh argues (rightly, in our opinion), and he goes on to say that culture challenges cannot be relegated to the HR department. Rather, culture should be seen as a key governance concern, one attended to by the board, CEO, and heads of risk management among firms. And asset managers must themselves address the roots of culture challenges within their own organizations, both to increase their future value, and to lead by example.