The Financial Reporting Council’s (FRC’s) “Culture Coalition” initiative has just released the results of a study, exploring the relationship between corporate culture and long-term business success in the UK.
The report is the culmination of the FRC’s Culture Coalition, a collaboration with CIMA, the City Values Forum, IBE, IIA and CIPD , as well as interviews with more than 250 chairmen, CEOs and leading industry experts, from the UK’s largest companies. The report explores the importance of culture to long-term value and how corporate cultures are being defined, embedded and monitored.
Sir Winfried Bischoff, Chairman of the FRC, said:
“A healthy corporate culture leads to long-term success by both protecting and generating value in the UK economy. It is therefore important to have a consistent and constant focus on culture, rather than wait for a crisis. A strong culture will endure in times of stress and change.
Key findings of the FRC’s study:
- Recognise the value of culture
- Demonstrate Leadership
- Be Open and Accountable
- Embed and Integrate
- Assess, Measure and Engage
- Align Values and Incentives
- Exercise Stewardship
However in their report to the FRC the Chartered Institute of Internal Auditors (IIA) found that one in three (31%) of boards across the public and private sectors have not established or articulated what sort of corporate culture they want and only around a third (36%) assess the extent to which values are manifested in the behaviour of all staff within the organisation.
Dr Ian Peters, Chief Executive of the IIA, said:
“Managing culture is a vital issue for Boards, to ensure not only that they are setting the right tone at the top, but that all employees are acting in accordance with the organisation’s ethics and values.
He goes on to say:
“As we have seen recently in the automotive and retail sectors, scandals can hit any industry, and whatever other factors come into play, culture always plays a significant role in the issue.”
The reports also highlight the difficulties in assessing ‘organisational culture’ and requests organisations to continue to engage in debate about how to drive forward organisational culture.
The Fraud Management Resource Centre has always recognised the importance of organisational culture in managing fraud risks and we have developed specific resources for Senior Managers to set the tone from the top and develop a zero tolerance anti-fraud culture including effective whistleblowing arrangements. It also includes specific tools for auditors and Human Resources in developing and assessing the adequacy of an organisation’s fraud management arrangements.