The role of HR in transforming culture within Financial Services

In a recent speech by Emily Shepperd, chief operating officer, at the 10th Annual Culture and Conduct in Financial Services Summit, Culture is Contagious, the FCA warned that culture spreads quickly, good or bad, through behaviours, decisions, and tone from the top. A healthy culture fosters trust, resilience, and informed risk-taking, while poor culture can infect entire organisations, leading to systemic harm.

The regulator’s stance is clear: failings in culture and governance are the root cause of most major conduct breaches. When the FCA investigates consumer protection failures or market misconduct, cultural weaknesses are almost always at the heart of the problem. 

This is why culture remains a supervisory priority and a key focus of regulatory engagement.

The consequences of neglecting culture are severe. Poor culture has led to misconduct scandals, multi-billion-pound fines, and long-term reputational damage that erodes trust and shareholder value. 

How does culture affect financial services performance?

Culture shapes decision-making, risk appetite, and customer outcomes. A strong culture reduces misconduct risk, supports operational resilience, and builds trust, which is critical in a sector where confidence is currency. Failures in culture have been linked to systemic crises and billions in fines.

What are the regulatory expectations around culture?

The FCA defines culture as “the habitual behaviours and mindsets that characterise an organisation” and focuses on four drivers: purpose, leadership, people management, and governance. Firms must demonstrate that these drivers reduce harm and support the spirit, not just the letter, of regulation.

Recent FCA speeches reinforce that:

• Culture is contagious, good or bad, and spreads through behaviours and tone from the top.
• Healthy cultures underpin responsible risk-taking and economic growth.
• Non-financial misconduct (bullying, harassment) is now a regulatory concern, with new rules applying from 2026.

A culture audit in financial services is a structured review of the values, behaviours, and systems that shape conduct and decision-making. 

It goes beyond engagement surveys to assess whether the lived experience aligns with stated purpose and regulatory expectations.

Key components of a culture audit

A robust culture audit in financial services examines whether the organisation’s values are truly embedded in day-to-day decisions. According to AuditBoard research, around 37% of organisations have never formally assessed culture. For example, if a firm claims “customer first” as a core value, does that principle influence product design, sales incentives, and complaint handling?

Leadership behaviours are another critical lens. Regulators and boards want evidence that senior leaders model integrity and accountability, not just talk about it. This includes how they respond to mistakes, reward ethical behaviour, and handle pressure to meet targets.

A healthy speaking-up culture is essential. Employees should feel safe to raise concerns without fear of retaliation. If staff hesitate to challenge decisions or report misconduct, risks multiply. 

Finally, decision-making processes must be transparent and well-governed. Are trade-offs documented? Are risk and compliance voices heard in commercial discussions? These questions form the backbone of an effective audit.

Tools and techniques for conducting a culture audit

Modern culture audits combine quantitative and qualitative methods. Surveys and interviews remain foundational, but they should include indicators of psychological safety and ethical climate, not just engagement. 

Behavioural analytics adds another layer, revealing patterns in collaboration, escalation, and even email tone that can signal cultural strengths or weaknesses.

Benchmarking against external data, such as Great Place to Work scores or FCA thematic reviews, helps firms understand where they stand relative to peers. 

Finally, dashboards that integrate these insights for the board are vital. They turn culture from an abstract concept into a measurable, reportable business metric, enabling informed oversight and timely interventions.

Our HR analytics software gives you full control and instant visibility of your people data, embedded at the heart of your HR suite and accessible for everyone.

HR play a key strategic role in embedding cultural change across departments in financial services, significantly impacting business performance and success in a highly regulated industry.

Aligning HR strategy with culture goals

Recruitment and onboarding should signal the organisation’s purpose and conduct expectations from day one, using realistic job previews and values-based interviews. 

Performance management and reward systems must reinforce the right behaviours, avoiding incentives that prioritise short-term gains over long-term trust.

Leadership accountability is non-negotiable. Linking culture KPIs to senior managers’ scorecards ensures that cultural health is treated with the same seriousness as financial performance. 

This alignment sends a clear message: culture is everyone’s responsibility, but leaders set the tone.

Training and development for cultural change

Effective training programmes focus on leadership behaviours, ethical decision-making, and inclusion.

Scenario-based learning helps employees navigate grey areas, while leadership development programmes equip managers to foster psychological safety and model transparency.

Conduct and Consumer Duty training should be practical, not theoretical, using real-world case studies to illustrate the consequences of poor culture and the benefits of doing the right thing. When employees understand the “why” behind rules, they’re more likely to internalise them.

Embedding speak-up and psychological safety

Creating a culture where employees feel safe to speak up is critical for risk management and innovation. 

This means more than installing a whistleblowing hotline. Organisations need multiple, accessible channels, digital platforms, anonymous surveys, and open forums, combined with visible follow-up on issues raised.

Leaders must be trained to respond constructively to feedback. If employees see retaliation or indifference, trust evaporates. 

Promoting diversity of thought and encouraging challenge in meetings also strengthens decision-making and reduces groupthink, a key lesson from past financial crises.

Transforming culture in financial services is a complex, multi-year journey that requires persistence, leadership commitment, and systemic change. 

Unlike process improvements or technology upgrades, cultural transformation deals with deeply ingrained behaviours, mindsets, and power structures. These factors make progress slow and, at times, fragile.
Financial institutions often operate within rigid hierarchies where authority flows top-down and decision-making is centralised. While this structure can support control and compliance, it can also stifle openness and innovation. 

Employees may fear challenging the status quo or speaking up about risks, especially if past attempts were ignored or penalised. Overcoming this resistance requires visible sponsorship from senior leaders, consistent messaging, and mechanisms that empower employees at all levels to contribute to cultural goals.

The sector’s competitive nature and pressure to deliver quarterly results can create tension between short-term financial targets and long-term cultural objectives. 

For example, aggressive sales incentives may conflict with customer-centric values, leading to conduct risks. HR and compliance teams must work together to align reward systems with ethical behaviours, ensuring that performance metrics do not inadvertently encourage misconduct. Aligning reward and recognition with company values and objectives is an important facet of a reward and recognition programme; we’ve discussed 4 other elements of a successful reward and recognition programme in our article.

This balance is critical to avoid repeating past scandals that have cost firms billions in fines and reputational damage.

Navigating cultural and hierarchical dynamics

Financial services firms often operate in hierarchical, high-pressure environments where silence can feel safer than speaking up. 

Overcoming this requires deliberate strategies: reverse mentoring to give senior leaders unfiltered frontline perspectives, speak-up champions embedded in teams, and behavioural nudges that normalise challenge (e.g., asking “What risks are we missing?” in every meeting).

Measuring progress and sustaining change

Culture transformation is a continuous cycle of measurement, feedback, and adaptation. Firms should track employee voice metrics (speak-up rates, psychological safety scores), conduct indicators (non-financial misconduct cases, resolution times), and engagement trends in risk-sensitive roles.

Quarterly “culture sprints” allow organisations to test interventions and learn fast, while annual culture audits provide a deeper review aligned with FCA expectations. 

Independent assurance, via internal audit or external specialists, adds credibility and helps boards discharge their oversight duties.

Culture is a strategic asset. For financial services firms, the cost of cultural failure is measured in fines, lost trust, and talent attrition. 

The reward for getting it right? Resilience, innovation, and sustainable growth.

Next steps for HR leaders:

• Secure board sponsorship for a culture audit within the next 12 months.
• Embed culture KPIs into SMCR accountability frameworks.
• Invest in leadership development and behavioural analytics to make culture measurable and manageable.

Discover how our all-in-one HR software empowers Financial Services organisations to foster connected, values-driven teams. From pulse surveys and recognition to performance insights, Access Employee Engagement Software gives HR leaders the tools to strengthen culture.

• Book a personalised demo to see it in action
• Explore our solution and start building a culture that drives performance