Let’s Talk Diversity and Inclusion (D&I) – How To Incorporate D&I into Your Governance, Risk & Compliance Plans
April 2, 2021
Diversity and Inclusion is an important focus for the Central Bank of Ireland (CBI), and also for the firms they regulate. The CBI on numerous occasions have pointed to a compelling body of evidence that greater levels of diversity can improve decision-making, improve risk management, and reduce the risk of groupthink. With that said, it is still evident that a large percentage of organisations are falling short of the expectations set out for them by the CBI.
The Central Bank has placed an increased focus on D&I in recent years. They are heavily focused on understanding/monitoring behaviours and cultures within regulated firms as the CBI look to evolve their supervision methods to be more “forward thinking”. The CBI have placed the emphasis back on regulated firms to ensure they are delivering D&I as a strategic priority within their organisations.
It is evident that the CBI are following through with their promises for stricter supervision in the D&I space as in recent years they have published numerous reports including:
· An in-depth examination of Behaviour and Culture (B&C), which included D&I, in Irish Retail Banks, published in 2018
· A thematic inspection of the F&P regime in both the insurance and banking sectors in H2 2019
· The annual demographic analysis of PCF data and trends across financial services. The most recent version of this report was published in 2020
In each of these publications the CBI have outlined where organisations are falling short of what is expected of them.
The recent thematic assessment of Diversity & Inclusion in insurance firms published in July 2020 found a number of common issues across the insurance industry. These included:
1. Most entities did not have a D&I strategy and where there was a strategy, it was not clear how it was aligned to the overall company strategic objectives
2. Most firms are not sufficiently prioritising D&I
3. Considerations of diversity and the overall effectiveness of boards and senior executive teams is not sufficiently evident in senior recruitment and succession planning
The Central Bank has issued a Risk Mitigation Programme to each of the firms requiring them to submit a detailed action plan to address the issues that were specific to them.
What needs to happen?
There are many actions organisations can take to improve their D&I strategies. For the purposes of this blog, we will focus on three, but action doesn’t have to end here.
The first thing that needs to happen is firms need to ensure they have a strategy in place for D&I and for that strategy to drive conversations internally at a board and senior management level so that an environment where diversity is valued filters down through all levels of the organisation.
Feeding out of the D&I strategy should be a number of measurable controls or key performance indicators (KPI’s) that can be tracked across the business. The performance of the business against these controls should be tracked on an ongoing basis and will lead to D&I being at the forefront of board and management meetings. Having the ability to see what areas the organisation is failing in enables organisations to put action plans in place to improve upon any areas that need improvement in relation to D&I.
Finally, whether its action plans coming from the Central Bank or internal action plans that need to be completed based on shortfalls found during control or KPI testing, organisations need to ensure that they have processes in place to carry out and sign off on important D&I corrective actions. Assigning ownership to corrective actions is a good way of ensuring a culture of transparency and accountability. From our experience, when actions are assigned owners, there is often a higher chance that they will be completed and signed off on.
How ViClarity can help
One of the cogs in ViClarity’s overall Central Bank Of Ireland compliance machine is a new D&I module we have developed based on the expectations from the regulator. The module breaks the banks expectations down into a series of controls that can be used by organisations to perform regular control testing to ensure their D&I processes and procedures are performing well and fit for purpose. Testing the controls allows organisations to identify any weaknesses proactively and take action based on the findings.
Secondly, the ViClarity system helps clients bring their D&I strategy to life. Rather than being a policy document that is dusted off every now and again, the system ensures that strategies and policies are broken down into a series of measurable key performance indicators (KPI’s) that are tracked and reported upon from the system on an ongoing basis.
Finally, ViClarity is known for its closed loop process. The system comes with a full preventative and corrective actions feature. This functionality is key for organisations who are looking to successfully manage actions or recommendations that are coming from the CBI or from internal management meetings. The feature creates a culture of transparency and accountability by assigning an owner and a due date to each action. The system will then prompt, remind and follow up with any individuals who have outstanding actions. Doing so, ensures that no important actions “fall through the cracks” and from an oversight perspective, management can report in real time on the progress of all actions and recommendations created, in progress and closed off on.
Interested in learning more about ViClarity D&I or wider Central Bank of Ireland compliance system?