Getting to grips with the changes that have been brought in as a result of the Senior Managers and Certification Regime (SMCR) for all FCA regulated businesses is not easy.

In a series of six podcasts, we've brought together our employment and financial regulation experts to simplify this area and explain clearly what those working within legal, risk, compliance, HR and operations need to think about at each stage of the employment cycle when it comes to complying with the SMCR.

In this fifth episode, we cover the importance of wellbeing in creating a healthy culture.




Jonathan Chamberlain: Welcome to this podcast. My name is Jonathan Chamberlain and I am a Partner in the Employment, Labour and Equalities team here in Gowling WLG. This is the penultimate podcast that we are bringing to you in which members from our employment and financial services regulation teams will be discussing the issues that arise from an SMCR perspective at each stage in the employment cycle. So far we have covered recruitment, some of the issues arising during employment, whistleblowing and issues on termination. Now today we are going to be moving away from the rule book and the statute onto the issue of wellbeing. To discuss this I am joined by Simon Stephen, a Director in the Employment, Labour and Equalities team.

Simon Stephen: Hello Jonathan.

Jonathan: And Ian Mason, our Head of Financial Services Regulation and joint Head of our Financial Services team as a whole.

Ian Mason: Hello.

Jonathan: So gentlemen, the issue of employee wellbeing in the workplace is a very prevalent question in the current circumstances which, if you are listening to this at any point in December through to I suspect June next year, are COVID-19. However, in and outside of COVID-19 wellbeing is a hugely important issue and it also raises challenges perhaps for Senior Managers in particular under the SMCR. Simon, what do we mean by wellbeing?

Simon: Yes so when we hear the word "wellbeing" there are many things which may spring to mind. We may first of all think of this as a pure health question - are my employees well? Am I in fact well? Some might also see it as more of a procedural point about providing benefits to employees, such as having an EAP or an employee assistance provider. It can also be seen as predominantly a mental health question rather than a physical health question, but it is in fact a much wider piece than that as together with health, both physical and mental, wellbeing in the workplace relates to all aspects of working really. So this includes the physical environment, which of course is very different now with COVID, how safe we are and that is safety both physical and psychological. It also includes our relationships with managers and co-workers and how our job interacts with factors outside of work, such as family, sleep, food and exercise.

As we spend a material amount of our lives actually working, more than some of us might want to, our jobs and everything to do with it actually has a huge impact on our overall wellbeing. How we feel about our jobs in terms of, for example, our expectations, our duties, our progression and indeed our resource, really does influence our overall health and happiness and then of course impacts those around us. This then has the knock-on effect of having employees engage with what they are doing and what their employer is doing. And this then leads to them being more productive and more innovative because it helps employees with dealing with stress positively and actually becoming more resilient.

So an employer should therefore see if it has better wellbeing of staff, better relationships, fewer errors and ultimately better company performance. And of course it can also help with an employer's brand, both inside and out. You see many articles in the news where companies are criticised for how they treat employees and how unhappy their workforce is, and there is no better advocate for an employer than a happy and engaged and well member of its workforce from within.

Jonathan: Thank you Simon. You've managed through the course of a very helpful answer not to mention COVID, which was of course how I positioned this at the beginning. So Ian I will move on to you for that if I may. Does the impact of COVID-19 on wellbeing really matter for the SMCR - could this really be said to be a regulatory issue?

Ian: Thank you Jonathan. Well I think it does, I think it is a crucial time for wellbeing to be on a firm's agenda as part of their overall approach to the pandemic, and the pandemic has really shown how important it is to look after employees, look after ourselves and for leaders to conduct themselves properly.

Well, as we all know, working lives are being completely thrown up in the air by COVID-19 and it has also dramatically changed how financial services have to operate in a really short space of time. There is also the well-known and publicised impact that the pandemic is having on people's mental health.

Whilst the FCA has relaxed some elements of SMCR compliance, for example the extension for solo‑regulated firms to March 2021 for a number of obligations such as conduct rule training, it is still expected that overall regulatory requirements, including under the SMCR, will be met and will be enforced so there is not any general amnesty here. The FCA are clear that there must still be a focus on culture in terms of conduct risk. Working from home and the pressures of restrictions and lockdown may increase opportunities for misconduct, and so firms have to adapt to ensure that the right controls and processes are still in place. As Julia Hoggett said in a speech recently "culture matters and it matters most when the risks are highest".

The FCA's webpage on COVID-19 also makes it clear that firms are expected to take reasonable steps to meet challenges posed to staff as well as customers, and operational resilience will continue to be a key focus to ensure that firms are able to deal with what COVID-19 throws at them. 

And this is where wellbeing comes in, as if you do not have a healthy, engaged and resilient workforce then it is, frankly speaking, going to be a lot harder to make sure everything is working as it should. Errors will happen and if controls are not maintained then errors will be missed. Conduct standards may also drop. If your employees are not resilient and equipped to deal with the challenges of COVID-19 then neither will your operational business be.

The FCA is therefore clear that senior managers themselves should be planning how to support employees within their responsibility, and that is not just about receiving the management information on paper and the paved responsibilities, it is actually about reaching out to employees and contacting them on a regular basis to make sure they are OK, it's about the personal human contact. And HR have an obvious critical role in this as well and it is also really important that they are working with senior managers on that front as well.

Jonathan: Thank you, Ian. I think it is clear that COVID does have regulatory implications particularly in wellbeing and an organisation where there is a strong emphasis on that is much more likely to be more resilient to the additional pressures that this pandemic has brought. 

I would like, if I may, to focus on a particular example of wellbeing, the flipside of which is a threat to the organisation, and that is psychological safety. We hear a lot about that. What is it and why is it important here?

Ian: Yes so this has come up in the context of speaking up. Part of the FCA's work on a cultural shift on whistleblowing and certainly speaking up on whistleblowing is very much going up the FCA agenda here, it is a hot topic. Psychological safety describes how someone feels about expressing an opinion or challenging something and has a big impact on wellbeing and culture.

So in a blog piece a while back the FCA quoted research that showed speaking up creates an effective team and that firms with higher psychological safety have higher performing teams, more engaged workforces, happier employees and more business success. So again it is a wider piece - getting a whistleblowing and speaking up process plays a key part in a firm's overall approach to conduct risk and employee management.

Jonathan: Interesting stuff, thank you. So Simon, pulling all this together what should firms be doing practically on this issue?

Simon: There is no single answer to getting wellbeing right. It is more of a holistic approach that pulls together many different strands, and for those who have listened to our other podcasts in the series they will have heard me talking about pieces of a jigsaw, so wellbeing really is part of that process of pulling the pieces together. That said, there are of course concrete steps that can be done. And the point Ian made earlier about senior managers' direct human involvement, from a senior management point of view, as we have highlighted across the podcast series, senior managers need to be at the forefront of pushing any initiative. They need to be showing the leadership expected, and that is especially so given the current lockdown and COVID restrictions which are hard work for many people. Clear engagements and clear messaging on expectations, firm, team and individual roles, all contribute to a positive culture, as the FCA have clearly pushed with the drive on "tone from the top" which is now leading to the focus "tone from within".

Of course having a good and clear set of benefits and policies is also going to be invaluable. Now I do not mean here yoga lessons or bring your dog to work day. Of course they do have a valuable role to play, but firms will actually have a material number of benefits which people simply do not know about which can really add to wellbeing and add to that culture of support. Taking an employee assistance programme for example; I can speak from first-hand how valuable they can be when seeking support with issues wider than mental health. In my case regarding my children. Often something like the EAP is simply not known about or just disregarded as a phone line to the Samaritans for example. Or they may actually only be known or seen when HR mention it as part of the support available in an invite to disciplinary for example.

We also need to think about how meetings are run and planned and how people interact as a team during the pandemic, and of course beyond. We must all contribute and think do managers build in the time, as Ian has said, to check in on employees and encourage people to put their hand up if there is an issue. And of course on top of all this, ensuring that you have the right support and networks in place - mental health networks for example, such as mental health first aiders, and others play a key role in helping people share ideas, seek support and, if properly promoted by the business with tone from the top, also help create a healthy environment. But again senior managers need to know what is available, they need to understand how it works and they need to be involved in the communications direction. Clearly sending someone off to HR or giving them a phone number just really will not cut it.

Senior managers also need the right data to be up to speed on the wellbeing issues in order to be able to take proactive steps. HR clearly has a key role to play here, but this is not just data about absence levels - there is areas such as the input from employees' surveys, statistics from the usage of employee assistance programmes, referrals from occupational health and other such statistics can all help to add up to a balanced scorecard picture of how a business is faring overall. You can even go further, looking at trends across all areas of risk and see how the employee wellbeing, particularly maybe psychological safety and the ability to speak up and whistleblowing, interacts with areas where you have lower and also increased risk.

So underpinning all of this and these practical tips are the points Ian made about psychological safety and the overall push we see from the FCA about having a healthy culture.

Jonathan: OK that has been really interesting but I do think that is all we have got time for on this podcast. Our next podcast will be the final one and will cover our closing summary thoughts and tips so please do look out for it. Thank you.

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