Managing unintended cultural implications of investigations

The last decade has seen significant societal, workplace and regulatory evolution, with financial services firms being held to increasingly higher standards. Consequently, the number, complexity and pace of investigations faced and instigated by financial services firms have risen exponentially. This has created an environment in which firms and their employees are exposed to increasing risk of regulatory, civil, criminal and disciplinary sanctions. When faced with such risks, the immediate focus is usually on responding to the specific issues under investigation (in compliance with regulatory and internal processes) and minimising the risk of sanction. However, one risk that typically gets overlooked is the fact that the investigatory process itself can lead to cultural implications, which may in turn be harmful to a firm and its employees. Such cultural implications, if not addressed, could evolve into a cycle of subsequent investigations and appeal processes scrutinising the treatment of employees, enterprise culture and impact, all of which are matters that could ultimately undermine the integrity and outcomes of the originating investigation. Firms must also not forget the importance of employees’ faith in investigatory processes and the link to psychological safety ߞ namely the need to instil an environment where healthy risk-taking and the challenge of poor conduct are encouraged without fear of victimisation or reprisals. The importance of this should not be underestimated. Psychological safety plays a key role in attracting and maintaining a wider range of individuals within an organisation and thereby driving resilience. This objective remains on the regulators’ radar, although its priorities for driving the objective have shifted from prescriptive equality, diversity and inclusion frameworks to a focus on tackling nonfinancial misconduct.1 While that shift may, in part, be driven by the political climate surrounding the issue of EDI (particularly in the USA), it may also reflect a view by the regulators that tackling nonfinancial misconduct is more immediately impactful. Workplace investigations play a key role in tackling nonfinancial misconduct, and so getting them right is crucial. The obvious areas for harm, should culture within an investigation setting not be carefully managed, are to an enterprise’s reputation, the referral of concerns to third parties and the loss of (or failure to attract) quality employees, shareholders and customers. This paper explores the importance of culture, how unintended cultural implications may arise in an investigation context and ways in which the unintended implications may appropriately be managed in order to mitigate risk.