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How can the financial services industry confront bullying, discrimination and harassment?
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Global Banking & Finance Review®
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By Paul Taylor, Vice President, Product Management at Smarsh
The financial services and insurance industries are among the most important to the UK economy, but the sector has faced issues when it comes to non-financial misconduct (NFM), including bullying, discrimination and harassment. This is particularly impactful in pivotal sectors, as misconduct leads to higher staff turnover, increased stress amongst employees and damaged reputations for companies who fail to take a clear stand.
The extent of the issue was brought to the fore even more so this year with the House of Commons’ Sexism in the City Report, quickly followed by FCA findings that allegations of NFM increased between 2021 and 2023. Similarly, our own recent research into this area showed that over half (59%) of employees in the sector have witnessed or experienced instances of NFM in their organisation.
All of this points to the very real need to address the issue at hand so there is no further potential of cultural deterioration within the industry, and so that financial services firms can rebuild trust with employees and the wider public. In order to do so, it’s imperative that leaders take action on three key areas.
Collaborative compliance
Ensuring organisations are compliant is one part of the task and requires a joined up approach, from connecting individuals across the business, to working with regulators. This is where collaboration is key.
The Financial Conduct Authority (FCA) is expected to introduce new industry standards around NFM in 2025. At the same time, our research showed that employees are clearly eager for regulatory intervention, with 9 in 10 (89%) in the sector saying that they are supportive of potential incoming rules and regulations.
As such, it’s important for business leaders to communicate openly and transparently with their employees. It’s important that employees are brought along on the journey, not only having the insight, but being able to directly contribute to making these improvements. Leaders must create a working framework for individuals across each department, from HR and recruitment to sales and IT, to be champions of implementing this change. Leaders should also continue to engage with regulators, which will help them to understand what measures may come into force and can therefore better prepare their organisation and support them in this rollout.
Proactive and reactive
Another important part of this is that firms must be both more proactive and reactive to issues around NFM. Being more proactive means getting to the root of the problem before it becomes an issue. If we were to liken it to financial misconduct, it’s common practice to do as much as possible, and put as many measures in place, to ensure you aren’t waiting for market abuse activity to take place, but are actively preventing it. While NFM is more nuanced, firms need to be applying the same principles to putting in place measures and processes for prevention. Equally, organisations need to be reactive when incidents are reported. Having appropriate measures and processes in place can also then help firms to be more reactive, equipping them with the insight to start investigations and take matters seriously.
Once again, financial firms already have the support of employees to identify and respond to these issues, with our research showing that 94% of employees in the industry say that it’s “very important” that NFM in their workplace is identified and responded to. In fact, 78% say that knowing NFM is being identified and responded to plays a part in whether they would stay at their current organisation.
Deploying AI
It’s clear that putting in place processes to detect and act on NFM will form a core part of how we solve this issue, and this is where a clear use-case for AI emerges. In recent years, companies in the industry have implemented AI in some form, most notably to increase productivity and cut repetitive tasks. However, they now have a real opportunity to leverage the technology to improve cultural challenges, like NFM.
Luckily, there is already support from employees in the space, with 66% saying they are open to AI being used to help identify instances of NFM over workplace communications in their organisation. Indeed, it is over communication channels whereby NFM can often occur or originate.
Firms are already archiving communications data for regulatory and compliance processes, largely for the detection of market abuse through industry guidelines such as the FCA’s Market Abuse Regulation, so it is a logical starting point to analyse this data that they are already storing. They can then leverage purpose-built AI to help identify NFM instances at scale that threaten organisational culture, reputation and their bottom line.
Only when the financial services industry brings together these three core elements can it truly begin to tackle the issue of NFM. While a deeply cultural problem, getting the processes and systems in place to help proactively identify and combat instances will be key, but thanks to AI, there is an opportunity to make this a streamlined and effective process.
Non-financial misconduct (NFM) refers to inappropriate behaviors in the workplace, such as bullying, discrimination, and harassment, which can negatively impact employee morale and company reputation.
Collaborative compliance involves working together within an organization and with regulators to ensure adherence to laws and standards, particularly regarding workplace conduct and ethical behavior.
AI in financial services can enhance operational efficiency, detect misconduct, and improve compliance by analyzing large volumes of data to identify patterns and anomalies.
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