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Steve Girdler, managing director for EMEA at HireRight, the global candidate due diligence company

Britain’s biggest banks have paid a high price for past misconduct, suffering substantial reputational damage and paying £50 billion in charges over the last six years¹. But, as financial services firms work to start putting people rather than profits at the heart of operations, the tide is starting to turn.

With reputation becoming such a significant differentiator for many companies in the industry, we spoke to HR directors in the UK’s largest financial organisations to identify if and how the most suitable people are being recruited during this time of change.

Despite the numerous high profile scandals, we found that the majority (79 per cent) of these companies still believe their organisation’s greatest risks are external, for instance, hacking. In fact, over a third (36 per cent) went on to admit that their leaders are complacent to the risk posed by their own people.

To help prevent further financial crises, a different corporate culture is clearly needed within financial service firms, fuelled by the right people at the top. The Financial Conduct Authority (FCA) is hoping that regulation will act as a further catalyst for this change. The Senior Persons Regime comes into effect in March next year with a simple overarching purpose: to crack down on wrongdoing in the financial services industry by holding individuals to account. Senior leaders will need to be approved by the body and have clearly defined roles and responsibilities.

In light of this changing landscape and with one in three HR directors (32 per cent) admitting it would be ‘easy’ for a determined candidate to bypass screening processes entirely, what other steps can financial service firms take to recruit the right leaders to ensure the industry continues to transform itself?

  1. Look Up 

The culture of any organisation is set by those at the top. However, our own research found that this isn’t being recognised, with two fifths (43 per cent) of financial service firms admitting that they use a different process each time a new board member is recruited. This suggests that there is no tried and tested hiring process to find the best leaders.

Often (41 per cent of the time) it is simply assumed that those applying for senior positions have not lied. But with leaders clearly playing such a vital role in the change that is needed, in many firms more care needs to be taken when choosing who will sit on the board and make high-level decisions.

  1. Be Consistent

 As financial service firms are regulated, it might be assumed that recruitment processes would be highly structured and methodical. However, our research indicates that this is not always the case.

Clearly senior leaders pose far more risk to reputation and profitability than any other employees and yet in almost half (45 per cent) of financial service firms, graduates go through more tests and checks than a new CEO. This suggests that in a large proportion of firms there is no process in place to assess the level of risk associated with job roles, and so ensure that the appropriate amount of due diligence is carried out each and every time.

To make sure that fair, robust recruitment decisions are made at all levels, financial service firms should consider updating or introducing a consistent, measurable recruitment process and clearly communicate this throughout the organisation.

  1. Be Vigilant 

 The boards of one in three (33 per cent) businesses that had been through a merger or acquisition contain members who have not been screened. As a result, a third of HR directors (33 per cent) in such companies know of a scandal that could affect their organisation.

Due diligence on leaders should always be carried out during M&A processes or the risk is that people who would not have otherwise passed the due diligence process will fill leadership positions.

  1. Be Creative 

A third (33 per cent) of businesses in the financial services sector rely on personal recommendations when hiring to the board, with two-fifths (39 per cent) admitting that connections win high-level positions. Tightly knit networks are still influential, it would seem.

New thinking needs to be introduced to spark culture change. Leaders should look beyond what and who they know to consider hiring a more diverse workforce with a fresh perspective.

  1. Be Prepared 

The broad strokes of public opinion tend to paint every company in an industry with the same brush. What this means is that the companies who will emerge from the crisis most successfully, will be those actively adapting before they are forced to do so. With the Senior Persons Regime coming into force in under a year, now is the time to make genuine change and make sure the right processes are in place to consistently hire only the strongest leaders.