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#Governance, Risk and Compliance

Education underpins accountability

International Compliance Association

accountability , education , New York , responsibility , speech

The drive for responsibility and accountability continues to gather pace.

Christine Lagarde, Managing Director of the International Monetary Fund, has placed the global spotlight firmly on the role of the individual in a 5 November speech to the New York Fed.

Entitled The Role of Personal Accountability in Reforming Culture and Behaviour in the Financial Services Industry, the speech mentioned the ambitious global reforms of regulation and governance that have been carried out under the guidance of the G20, and which have brought about significant change within the industry.

Ms Lagarde focused on the importance of ethics, culture and behaviours, telling her audience: ‘Regulation and governance are only two pillars of a framework that can instil ethical behavior in finance. The individual is the third pillar without which there can be no equilibrium.’ She also spoke of individual accountability as holding real promise ‘as a powerful catalyst for cultural renewal.’

Whilst organisations can work hard to establish and improve their culture to meet high standards of conduct, little can ultimately be achieved unless individuals rise to the challenge of working in an ethical way, with integrity and exhibiting positive behaviours consistent with their organisation's culture.

What does this mean?

This has implications for the compliance profession. For the last decade or so, compliance professionals have been required to manage within an operational and legalistic framework, often across jurisdictions, to ensure that their institution complies with the law and operates within a myriad of regulations that may differ from country to country.

The work had sometimes become formulaic, driven by the production of manuals and checklists designed to ensure that every rule is identified and risks are satisfactorily mitigated. There was a clear need to enhance technical competence and individuals and firms naturally look to ensure that their teams are appropriately equipped in this area.

But now regulators are looking to improvements in culture and individual conduct. This brings further responsibilities to the compliance professionals. They have become guardians not only of regulatory rules but we see increasingly their role as ensuring the delivery of the 'spirit' of compliance and ethical conduct. This will bring other management challenges for the profession. Proper management and a focus on development of human capital, encouraging performance and demonstrating the required behaviours will become core.

What was refreshing in this speech was the acknowledgement that educators have a role to play in bringing about this cultural renewal and incentivisation to good conduct. For compliance professionals, this is the moment to show leadership. As John F Kennedy said: ‘Leadership and learning are indispensable to each other.’

 

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