Justin Hughes writes on issues relating to team and organisational performance. A former Red Arrows pilot, he is now Managing Director of Mission Excellence, a consultancy focused on improving clients’ execution – their ability to close the gap between what gets talked about and planned, and what gets done. Justin previously spent 12 years as an RAF fighter pilot and is a renowned speaker on performance and risk and has presented alongside Richard Branson and Kofi Annan.

The US recently charged 14 current and former FIFA executives with racketeering, fraud and money laundering. The US Attorney General spoke of ‘systemic fraud’ over two generations.

FIFA carried on business as usual with ‘plans’ to re-elect the existing President this week on whose watch the alleged offences occurred.  Obviously.  Why wouldn’t you?  The week before Barclays was fined £2.38B for rigging of foreign exchange and other markets.  This is an organisation which has undertaken very public campaigns promoting values and ethics over the last several years.

However it would be unfair not to also mention in dispatches HSBC, RBS, Citibank, JPMorgan Chase (of recent rogue trader and (absence of) risk management fame), Bank of America and UBS (previous comments apply) who all put in strong performances in attempting to achieve AAA status in the fines and infamy ratings.    

Now it’s probably fair to assume that the relevant executives in neither FIFA nor banking had early career aspirations to be engaged in large-scale criminal activities or would consciously choose to share living accommodation with Hannibal Lecter in a US Supermax prison over Zurich’s 5-star Baur au Lac Hotel.

So what went wrong?  If the individuals were at their brother’s house for Sunday lunch, would they steal the cutlery?  So why do they (allegedly…) knowingly engage in blatantly criminal activities at work?  What is it about ‘how we do business around here’ which allows mature adults with families often at the apex of their careers to rationalise and legitimise such behaviours?

If we leave FIFA for a moment, since the jury is not just out but yet to convene, and focus on culture and risk management in financial services, I offer 2 observations:

Firstly, with regards to risk management, the process and compliance route is essential but insufficient. Large organisations headed by intelligent left-brained individuals (not exactly uncommon) tend to be uncomfortable with the concept that a solution cannot be found through analysis and process and that it might be necessary to trust people to apply good judgement and common sense; surely this is an abrogation of responsibility.

I would argue the opposite. If one is working in an environment where are there are many variables outside one’s control, many of which may be correlated in ways which are not blindingly obvious, then it is irrational to assume that the system can be de-risked through process alone.  The only rational solution is to equip individuals and teams with the decision-making and communication tools for the ambiguous time-pressured situations they will face armed with only imperfect information.

Behavioural risk is at least as important as technical risk.  Aviation learnt this lesson in Tenerife in 1977 when 583 people died in a collision between two perfectly serviceable aircraft on the ground in fog.  Behavioural safety training is now mandatory for commercial pilots worldwide. Oil and gas relearnt the lesson in the Gulf of Mexico in 2010. In both cases (in the latter case literally) a burning platform was required to make the change. Fortunately in financial services, nobody dies. Unfortunately however, it would appear that massive fines and reputational damage are currently an insufficient incentive to change.

Secondly, you can’t isolate risk, outsource it, insource it to a separate department, or treat it as an exercise in compliance.  It is the day job and ‘how we do business around here’.  The organisational culture will define its attitude to risk.  Leadership will be highly influential on culture. It is not sufficient to recognise the issue, talk a good story, or put fancy artwork promoting values in reception.  The concept, communication, delivery and outcomes must all be aligned.  Leaders will influence this in three key ways:

One lesson that has been well learnt via the hard route in organisations which manage risk and safety well is that empowerment, decentralisation of decision-making, trust and permission to exercise judgment are not a free lunch. With responsibility comes accountability. When the regulator shows the same teeth used on FIFA to the financial services industry, then that may produce a rather more dramatic behavioural change than punishing shareholders, which is all that fines really do. 

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