FCA diversity and inclusion study finds few firms fully understand issue

The FCA review into 12 firms, published earlier this month, found some in the financial services industry only took a “compliance approach” to diversity and inclusion, and lacked genuine commitment to the issue. It said: "Such focus, in isolation, risks creating a culture where firms attempt to 'poach' diverse senior talent rather than develop their own pipelines. This is not a sustainable approach and is unlikely to bring meaningful, long-lasting change."

Anne Sammon of Pinsent Masons warned that the small sample size of just 12 firms meant it was important not to extrapolate from the data too widely. “All the firms that took part were early in the development of their approach on diversity and inclusion. This is surprising given that there has been a lot of focus on this issue within the sector for a number of years. What is even more surprising, though, is that the FCA found that very few firms had understood diversity and inclusion as a fundamental culture issue,” Sammon said.

The FCA gathered data from the sample of 12 firms across multiple sectors, and held a 90-minute structured interview with each firm. It found that diversity and inclusion strategies “are not consistently based on a clear diagnosis of their specific circumstances and challenges” and warned that poor data quality also hampered firms’ ability to carry out intersectional analysis to understand the experiences of different groups.

The regulator also found that the firms it spoke to were most focused on addressing gender representation. While it said the issue of race and ethnicity was starting to receive more attention, other demographic characteristics were still being ignored. It noted that “almost all” of the people it interviewed were committed to making progress with diversity and inclusion, but the FCA found that many firms’ strategies were “generic and did not take a holistic view”.

Sammon said: “In the diversity and inclusion space, a one size fits all approach does not work. Firms need to first identify their challenges, issues and systemic barriers and then set out strategies to remedy these. However, that does require real investment in diversity and inclusion rather than it being an optional add-on, as is often the case in practice. There seems to be a real focus by the FCA on systemic change – firms are unlikely to meet regulatory expectations going forward by simply having policies in place designed to address a multitude of diversity and inclusion issues. Instead, it seems likely that the FCA will expect firms to properly engage with the issues.”