Carrot or Stick? Culture as a regulatory approach

Aim: To consider whether culture can be used as a tool for regulatory compliance.

Outcomes: At the end of this module, the reader will understand:

  • How a regulatory focus on an organisation’s culture may help deter misbehaviour and drive regulatory compliance; and
  • the type of culture (i.e. a culture of compliance, ethics, or risk management) regulators could promote, and why, to achieve regulatory objectives.

Abstract: This brief essay is from a Financial Conduct Authority discussion paper, Transforming Culture in Financial Services. It explores whether regulation can motivate desired behaviours and the role of culture in companies. The three types of culture (culture of compliance, ethics, and risk management), along with the pros, and cons of each type, are described.