Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
In a care[...]
UK PRA Launches Diversity and Inclusion Consultation
Consultation | Sep 25, 2023
Image: Unsplash/Alexander Grey
The Prudential Regulation Authority (PRA) has released a consultation paper, CP18/23, on 25 September 2023, proposing rules and expectations to enhance diversity and inclusion in PRA-regulated firms to improve governance and decision-making.
Purpose of the Consultation
- The Prudential Regulation Authority (PRA) has proposed rules and expectations to enhance diversity and inclusion in PRA-regulated firms. This is believed to bolster firm governance and decision-making, aligning with the PRA's objectives.
- The consultation has been developed alongside the Financial Conduct Authority (FCA), which is also releasing a consultation paper on the same topic for FCA-regulated firms.
See: McKinsey Report: Diversity in Global Private Markets 2022 and Institutional Investors as Catalysts for Change
- The current proposals are built upon the regulators’ joint discussion paper titled "Diversity and inclusion in the financial sector – working together to drive change" which was published in July 2021.
Significance of Diversity and Inclusion
- Diversity and inclusion are essential for effective governance and decision-making within firms, reducing groupthink and enhancing risk management. While diversity covers demographics, experience, and thought, it's the role of inclusion to ensure these diverse perspectives are actively considered, especially by leadership boards, fostering a culture that values and encourages varied viewpoints.
- Challenges: Changing organizational outcomes to be more diverse and inclusive can be challenging and may take time. Initially, diverse teams might face challenges due to differences in perspectives and communication styles. However, over time, such teams, when led by inclusive leaders, tend to make more robust decisions.
- The PRA acknowledges that there are varying opinions regarding the evidence supporting the benefits of diversity. However, they believe there's enough evidence to warrant policy consultation in this area.
Participate in this Consultation by Monday 18, December 2023
- Respondents have the option to consent to the publication of their names in the PRA’s feedback response. They can also indicate if they regard any of the information they provide as confidential.
- Responses can be emailed to: CP18_23@bankofengland.co.uk
See: FCA Speech: Adapting Culture to Meet Changing Societal Norms and Consumer Expectations
- Alternatively, they can be addressed to: Governance, Remuneration and Controls Team, Prudential Policy Directorate, Prudential Regulation Authority, 20 Moorgate, London, EC2R 6DA.
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