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Does trust equal profit?

If leaders truly want to ensure their customers have faith in their business, it’s time for compliance to come out of the back office and be part of a top-down strategy.

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It says something for the beleaguered state of the banking sector that arguably its fundamental challenge has little directly to do with profit margins. Of course healthy figures are fundamental but most organisations are learning that they must build something else first: trust.

Compliance has always been expected, both morally and legislatively, of our banking institutions. But the onset of the financial crisis and the house of cards-style collapses that followed have made it an absolute necessity not just to be seen to be responsible, but to genuinely embrace change – to become a more open and transparent industry. And at the heart of this movement is the compliance officer.

It could be argued that organisations from the global giants to the small independents have little choice these days but to follow the rules (set out by regulators such as the Financial Conduct Authority, especially since the crisis spawned so many of them. But even without a regulatory stick to guide them, Britain’s financial institutions are recognising the need to restore customers’ and clients’ faith in them and the industry.

But from where in the organisation does this change need to be driven? While the compliance team can act as a powerful lever across the business, who else has a key role? The answer, of course, is everyone. But more than anyone else the tone at the top is critical to success.

Richard Hill

Richard Hill

“CEOs need to drive this change,” says Richard Hill, Executive Director of Cambridge Judge Business School’s Centre for Compliance & Trust. “When Antony Jenkins took over at Barclays he made it clear he wanted to re-establish the heart of the organisation, to restore customers’ faith, and other CEOs need to adopt similar missions. It’s all about rebuilding trust.”

But once this commitment has been made, what action needs to follow? What do CEOs actually need to know about compliance? And how can their compliance officers help them? The Centre for Compliance & Trust works with a range of financial institutions to explore new ways in which banks can re-engage with society by developing more responsible business practices. And when it comes to compliance, chief execs, says Hill, need to be on top of some fundamentals if they are to restore trust.

A good CEO should be asking what the business knows that they don’t,” says Hill. “The chief executive is relying on report structures, but they should be asking themselves if everything relevant is getting through, particularly in a huge global organisation. You’re accountable – you need clear lines of communication.

Then there’s the question of what your organisation knows that your customers don’t. Transparency and communication are key to any company withstanding scrutiny – particularly that of a sceptical public. Customers have to be confident that as well as complying with the letter of regulations, the spirit is also being followed. So it’s important to send out the right messages – and mean them – to truly build trust.

Almost all major institutions have a mission statement, but the real day-to-day values are found elsewhere, suggests Hill. “You can’t depend on a corporate values statement to guide everything,” he says. “You have to look for how your organisation really works, how it really believes in doing business. A culture that engenders trust and honesty is key to this, supported by a reporting system that is fit for purpose. If the system is working properly, you’ll have an environment in which it’s safe for people to tell you things, and for people at all ends of the chain to feel their work is valued and their concerns are listened to. If you think that culture doesn’t exist, it’s up to you as CEO to create it.”

Of course alongside cultural issues there are firm financial indicators of how a firm is doing. “It’s straightforward to assess a company’s performance against its competitors,” says Hill. “But principles-based compliance means assessing your company against its own unique values – is it really, sincerely delivering what it purports to do? In that context, the performance of rivals doesn’t matter – a competitor may not be delivering or operating in the same way as you. If you’re seen as true to your values, you will gain that trust from customers and clients.”

So as the face of the organisation, CEOs need to be seen personally to be setting an example. Barclays’ Antony Jenkins’ attempts to clean up banking may have quickly earned him the tongue-in-cheek nickname “Saint Antony” in the City, but he is seen to be practising what he preaches. So the argument follows that if you’re a good role model to your staff and the public and show you’re genuinely committed to compliance in all its forms, your chances of restoring the faith in the industry of its clients, the government and the wider public are greatly enhanced. Clearly it’s never been more important for compliance to make its way out of the back office.