FCA Publishes Findings of Diversity & Inclusion Review of 12 Firms

Herbert Smith Freehills | Dec 15, 2022

On 12 December 2022, the FCA published the findings from its qualitative research in respect of the diversity and inclusion (“D&I“) strategies and practices that regulated firms (“Firms“) currently have in place to improve D&I within their workforce (“FCA Review“).

Though the FCA Review does not amount to regulatory guidance on D&I, it does provide a clear picture of what the FCA’s expectations are when it comes to D&I; hence, the FCA encourages all regulated firms to consider the FCA Review when developing their own D&I strategies and practices.

See:  McKinsey Report on Gender Diversity in Canada

Select Key findings (weaknesses):

  • Gender representation has so far attracted most of the attention in D&I, whilst ethnicity started to pick up more recently;
  • There is a suggestion that a ‘compliance approach, rather than a genuine commitment to diversity and inclusion’ is driving some strategies – the FCA gave the example of firms which have focused almost exclusively on gender representation at senior levels because there are external targets and expectations for it;
  • Firms tend to address D&I concerns through lateral hirings at the senior management level, hence D&I at the junior and middle management level is lagging behind;
  • Data quality was correlated to D&I performance – Firms with better diversity data tended to have a better understanding of their position and were better placed to decide which actions to take;

See:  Research: Financial Inclusion and access to financial services in the UK

  • Firms’ existing D&I practices show an overreliance on measures such as training, network groups and allyship. Other practices include: supporting career progression for staff returning to work; encouraging parental leave for both men and women; setting specific business area targets; extending the reach of entry level recruitment beyond elite universities; diverse shortlists; diverse interview panels; and anonymised CVs;

Next steps: Firms that were part of this review received written feedback letters from the FCA. The FCA plans to follow up with these Firms through its usual supervisory activities to assess how they have considered the FCA’s feedback.

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