The FCA’s latest report into D&I highlights the need for additional metrics, social mobility, firm culture, staff development, data quality, and systematic strategies.
In 2021 and 2022, the FCA carried out a survey of firms in respect of their approach to diversity and inclusion. In advance of a full consultation on new rule proposals in 2023, the FCA has provided a progress update. Overall, the FCA remains concerned about the lack of progress in the industry and has highlighted a number of key points that it encourages regulated firms to consider and use.
- Additional metrics: Firms have primarily been focused on gender, and next on ethnicity, but less on other potential diversity metrics (the FCA makes several references to socio-economic and cognitive diversity).
- Social mobility: Few firms focused on social mobility, at least to a sufficient degree. The FCA has reiterated that understanding metrics and performance in this area will be seen as being as important as areas such as gender and ethnicity going forward.
- Culture: Many firms failed to make the link between diversity and inclusion, and the culture of the firm. Culture is seen as a key driver and mitigant of risk, and diversity and inclusion are seen as important elements in improving performance as a result.
- Junior talent: The key stage at which diversity metrics weaken is between junior and mid (rather than mid and senior) levels. Firms need to focus on retaining and progressing junior talent.
- Career development: As a result, at senior levels, firms have focused too much on poaching rare diverse talent from their competitors, rather than developing their own candidates. It is clear that the FCA sees this as a key next step if the industry is to persuade the FCA that performance is improving.
- Diversity data: There is wide variation in data quality. Firms with better diversity data had a better understanding of their position and were better placed to decide which actions to take. This variation was largely the result of differing levels of success with staff declaration rates. Firms with the best declaration rates have worked hard to achieve this, with focused initiatives to build trust and understanding, and optimising touch points with staff.
- Strategies: Firms’ diversity and inclusion strategies are not consistently based on a clear diagnosis of their specific circumstances and challenges. This means actions and initiatives may not be appropriately focused. Firms are also not systematically tracking the effectiveness of these measures and initiatives. This leads to a lack of understanding about what really works.