Culture is key to solving regulatory challenges – Kinetic Partners survey

Some 83% of financial industry CEOs believe culture is the most important factor to get right in order to solve the regulatory challenges facing their companies, according to the findings of the latest Kinetic Partners Global Regulatory Outlook research study.

The figure was even higher – 91% – among chief compliance oficers.

Julian Korek, founding member of Kinetic Partners and one of the authors of the study, said: “The culture within any company is set by the CEO – and it’s good that our CEOs recognise that and recognise the symbiotic link between culture and compliance. Getting the culture right so that people make the right choices is essential for financial services firms, and will define the way the firm does business and the way it interacts with clients and prospects. That’s why so many of the industry leaders we spoke to see this area as key battleground in terms of getting regulation right – but also as a potential minefield.”

One of the outcomes of the global financial crisis has been to shift the financial services industry away from global integration towards more localised regulation, Korek said.

This is causing more diversity between regulators, in turn leading to differences in interpretation across countries or regions. These sorts of differences will impact on cross-border trading.

Other findings of the latest research include:

   • More than two-thirds (66%) of the senior managers questioned felt that a company’s culture was the most important part of the governance function to get right in order to avoid significant regulatory problems, compared with finding staff with the right regulatory skills (3%) and a relationship with the regulator (1%).

   • Although the majority of respondents stated that the availability of commercial opportunities has the most influence on where they look to do business, the existence of local regulatory requirements was listed as the second most important factor.

Julian Korek said: “A move towards centralised, cross-border regulation is inevitable for banks, but the debate about its suitability for the rest of the financial services industry is still ongoing. The industry’s argument is that national regulators better understand the culture of their own jurisdictions, and many regulators have accepted the legitimacy of this argument. As a result, it’s unlikely that we’ll ever see centralised regulation for the entire industry.”


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