An effective, ethical, corporate culture is key to meeting regulatory expectations for a financial institution’s risk culture. An important component of a healthy risk culture is effective escalation.
In a session led by Dave Wright, senior vice president and director of regulatory services for U.S. Bank, at GCOR XIII, attendees learned how employees can properly escalate and receive concerns.
Wright said that when employees live positive values, and act consistently with those values, they improve an organization’s culture.
When driving your car, “it has become socially acceptable to exceed the speed limit, since people look at the behavior/social norms of others driving around them. The same holds true when you’re employed at a new company. People will tend to mimic the same behavior by looking around to see how or why others may be succeeding and emulate that behavior,” said Wright.
He advised that the key aspects of culture must be implemented from the board of directors and senior management and driven down to middle management and then down to the front-line staff and employees who in turn reflect that tone from the top back up to middle management.
“You have to get buy-in for the core values in your organization, which is the glue that brings everyone together to accomplish a common goal. An organization’s culture is defined by the countless daily actions of its people,” he said.
Wright also noted the importance of managing misconduct risk in your organization. Regulators expect financial institutions to take steps to reduce misconduct risk, promote a healthy culture, and focus on values to reduce the potential for employee misconduct.
He said that in order to cultivate an ethical environment, financial institutions must articulate core values, develop leaders, and listen to employees.
Instill values and training and support “by developing ongoing training programs that support behavioral changes and skills around judgment and identifying misconduct risk; promote the importance of a ‘speak up’ culture; and support credible challenge and appropriate channels for internal escalation,” he said.
The goal of effective issue identification and escalation is to effectively resolve an issue in an action-oriented manner by promoting team cohesion.
Common situations where escalation is necessary include compliance concerns, the risk of adverse regulatory action, inter-group conflicts, differing expectations about roles and responsibilities, and resource constraints.
When employees escalate an issue, they should “determine who’s the best person to receive their concern; escalate it to the appropriate organizational level; provide a concise summary of the problem; state what they need, when they need it, and the consequences of inaction; follow up, even after sending an email or making a phone call; and ensure their tone is appropriate and respectful.”