• Building resilience through risk culture.

  • Empowering our clients to improve performance.

Barclays & VW – Risk Culture Parallels?

Q.   How are a bank and auto manufacturer alike?

A.   Some of their people have cut corners to avoid regulations.

One of our earlier posts questioned whether there were more than “a couple of rogue software engineers” involved at VW in trying to outwit regulators on emission controls.

 

Different rules for the rich

The BBC has now reported that Barclays Bank has been fined £72m by the Financial Conduct Authority (FCA) in the UK “for failing to conduct proper checks on very rich clients because it did not want to inconvenience them”.  (This is quite separate from the LIBOR scandal which cost Barclays a great deal more in fines).

According to the FCA these checks were required to minimise the risk of financial crime.  Barclays was found to have applied a lower level of checks to these very rich clients than was the case with lower-risk customers (although no crime was found to have been committed).

 

The glitter of gold beats risk management – again

To quote the BBC report again –

“Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable,” said Mark Steward, director of enforcement and market oversight at the FCA.

Barclays say they cooperated fully with this enquiry by the FCA and surely they will be working hard to build a more effective risk culture.

As we all know, similar risk culture failures have happened in so many organisations, across a range of industries.

 

What needs to change?

Talking about “tone at the top” has become clichéd.  We have no doubt that the foundation of a sound risk culture is to ensure that the natural default setting for leaders at all levels is to act with integrity.

Leaders who can achieve results are essential but too often, when leaders are chosen, the focus on results is given more weight than acting with integrity.  If integrity is pushed aside in favour of results this carries huge downside risks for brand reputation and sustainability for the organisation.

Do you think leadership integrity is an important factor in managing risks effectively?

 

How’s Your Risk Culture

If you’re curious about your own organisation’s risk culture you can use our free Risk Culture Health Check to get a simple assessment.

Please feel free to share this blog because sharing ideas helps all of us to improve performance.

About the Authors

John Dawson & Carmel McDonald are the co-owners of Dawson McDonald Consulting.  They’ve been running Risk Culture Assessments since 2008 to help clients understand the strengths and weaknesses of their culture in managing risk, and how to strengthen it to protect their organisation and build resilience.  They can be reached at info@riskculture.com.au

John Dawson

John Dawson

Carmel McDonald

Carmel McDonald

In 2015 they published a book BUILD Your Business.  Risk Managers will also find this helpful in communicating their message effectively

To get your copy of this book, or to download a free sample chapter, click here

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