Financial services cultural assessment – KPMG

Article Synopsis :

Much has been written in recent years about the conduct of financial institutions, with the attention largely on the adverse impact on consumers.

“Culture eats strategy for breakfast.” – Peter Drucker

In “Financial services cultural assessment and transformation”, KPMG Australia studies the issue of culture in financial services, specifically how it can be measured, understood and, ultimately, changed.

A recent global KPMG study confirms a number of financial institutions have become more focused on shareholders and employees, less focused on value to customers and impact on society. Understandable, given the intense competition for financial and human capital, the shift manifests itself in a number of ways, including:

• Sales incentives that encourage employees to focus on targets and product campaigns above all
• Organizational structures that drive focus on product manufacturing and distribution over customer centricity
• Portfolio views of the customer focused on cross selling that encourages product development and sales that may not offer customer value
• Complex products and opaque pricing benefiting shareholders over simple and transparent products benefiting customers
• Minimal and legalistic regulatory implementation over principles- and values-driven compliance

Redefining the culture of financial institutions, making them more balanced, can help achieve the following:

• Reduce regulatory costs: In the UK alone financial institutions have spent 38.7 billion pounds in fines, remediation costs and management costs. All major markets have a similar story
• Stem further political intervention into financial markets: With trust in financial institutions low, interventions have been legislated in key areas such as capital (Basel 3), customer engagement (FoFA), and key business activities such as derivative trading (Dodd Frank) and payments (New Payments Platform)
• Provide a positive response to disruption: Including digital. New participants with a sharp focus on customer engagement are targeting the profit pools of financial institutions. Organizations oriented toward customers and communities are better placed to respond to this disruption
• Respond to new competitive threats: A balanced response is required to address the competitive threat of new entrants in the market, such as digital natives, retailers and others exploring broader financial services offerings

For the action-minded, cultural diagnostics, and techniques for achieving balance and making cultural change happen, based on Edgar Schein’s model of corporate culture and KPMG’s own approach, are discussed in depth.

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