4 Stephanie Chaly, James Hennessy, Lev Menand, Kevin Stiroh, and Joseph Tracy, Misconduct Risk, Culture, and  Supervision, Federal Reserve Bank of New York, December 2017. 5 Stiroh, Kevin J., The Complexity of Culture Reform in Finance, October 4, 2018. 6 Board of Governors of the Federal Reserve System, Federal Reserve Board invites public comment on two  proposals; corporate governance and rating system for large financial institutions, August 3, 2017. 7 See Banking Standards Board. 8 Board of Governors of the Federal Reserve System, Federal Reserve Board requests comment on proposed  guidance that would clarify Board’s supervisory expectations related to risk management for large financial institutions, January 4, 2018. 9 Dudley, William C., Strengthening Culture for the Long-Term, June 18, 2018. 10 Lois V. Brown, Psychology of Motivation, 2007. Coon D, Mitterer JO. Introduction to Psychology: Gateways to  Mind and Behavior With Concept Maps. Belmont, CA: Wadsworth; 2010. Oudeyer, P. and Kaplan, F. What is Intrinsic Motivation? A Typology of Computational Approaches. Front Neurorobotics, 2007. 11 See Banking Standards Board, Annual Review 2017/2018. 12 Department of Finance, Minister Donohoe Welcomes Banking Initiative That Aims to Rebuild Trust in the  Industry, December 31, 2017. 13 Federal Reserve Bank of New York, Workshop on Culture Measurement and Assessment, June 21, 2017. 14 Financial Stability Board, Strengthening Governance Frameworks to Mitigate Misconduct Risk: A Toolkit for Firms  and Supervisors, April 20, 2018.
As all risk managers know, you can’t manage what you can’t measure. This is equally true in the area of misconduct risk. At the same time, while hard data is important, I don’t believe it is sufficient to convey all of the complexities of a firm’s culture or all of the ways it can impact business outcomes. In recent years, we have seen firms develop dashboards that seek to bring together various metrics from across their organization. This is an important and necessary step. Data sources that we’ve seen include internal quantitative information such as compliance and policy violations, completed trainings, audit results, and risk metrics like limit breaches, policy violations and external metrics like customer complaints, stakeholder perceptions, and client surveys. There also are qualitative data based on employee surveys. Some firms have begun to do more frequent pulse surveys with small cohorts of staff. Other firms have found that long-term trends are more insightful than short term changes. These types of data, while necessary, are not sufficient to make progress. Supplementing hard data with interviews, focus groups, dialogue, and external benchmarking can greatly enhance an organization’s ability to manage and strengthen its culture. Measurement and metrics are best used as a starting point to spur further analysis and probing as boards and senior management seek to identify trouble spots and build strong cultures.