Diversity and Inclusion (D&I) have become critical focus areas in the financial sector, which has historically lagged behind other industries in fostering equitable workplaces. Despite progress, significant disparities persist. Women hold only 21% of board seats in the financial services industry globally, and people of colour are underrepresented in senior leadership positions across major financial firms. A McKinsey report found that companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability compared to those in the bottom quartile, underscoring the tangible benefits of diverse leadership.
In September 2023, the Financial Conduct Authority (FCA), in collaboration with the Prudential Regulation Authority (PRA), issued a consultation paper proposing a groundbreaking regulatory framework aimed at enhancing D&I within the financial sector. As the consultation period has now closed, we await the final policy statement expected later this year, with changes to be implemented 12 months thereafter.
Here’s what your business needs to know to stay ahead of the curve and ensure compliance:
Key Requirements for Firms with Over 251 Employees:
Maintain an Effective D&I StrategyFirms must develop and maintain a robust D&I strategy that is actively implemented and regularly reviewed. This strategy should align with the firm’s overall business goals and demonstrate a commitment to fostering an inclusive workplace.
Set Appropriate Diversity TargetsEstablish clear and measurable diversity targets tailored to the unique context of your organisation. These targets should address various aspects of diversity, including but not limited to gender, ethnicity, disability, and other underrepresented groups.
Collect and Report Demographic and Inclusion DataFirms will be required to gather comprehensive demographic data from their staff and measure inclusion through regular surveys and feedback mechanisms. This data must be reported to the FCA and disclosed publicly on an aggregate basis, ensuring transparency and accountability.
Recognise D&I as a Non-Financial RiskAcknowledge and manage the lack of diversity and inclusion as a non-financial risk within your organisation’s risk management framework. This involves identifying potential risks associated with poor D&I practices and implementing strategies to mitigate these risks effectively.
Requirements for All Regulated Firms (Regardless of Size):
All regulated firms, irrespective of their size, will need to comply with specific baseline requirements set forth by the FCA and PRA. While the detailed requirements for smaller firms have not been fully disclosed, it is clear that the emphasis on fostering inclusive workplaces extends across the entire financial sector.
Why does this matter?The introduction of these regulations marks a significant shift towards promoting equity, diversity, and inclusion within the financial industry. By complying with these requirements, firms not only adhere to regulatory standards but also benefit from the numerous advantages of a diverse and inclusive workplace, such as improved employee satisfaction, better decision-making, and enhanced company reputation.
How We Can Help: We are uniquely positioned to support your organisation in navigating these new regulations. How can we help?
Developing Comprehensive D&I Strategies: We can assist in creating a customised D&I strategy that aligns with your business objectives and ensures regulatory compliance.
ED&I Masterclasses: Providing leaders, managers and Talent Acquisition teams with practical help to not only managing inclusively and motivating high-performing diverse teams, but attracting and retaining that diverse talent.
Setting and Achieving Diversity Targets: Our experts will work with you to establish realistic and impactful diversity targets, providing guidance on best practices and effective implementation.
Data Collection and Reporting: We offer tools and services to help you collect, analyse, and report demographic and inclusion data, ensuring transparency and accountability.
Risk Management: We can help integrate D&I considerations into your risk management framework, identifying potential risks and developing mitigation strategies.
Click here to book a free consultation call with Adam to discuss how we can help