First published in Accountancy Ireland on 02 June 2023
Chartered Accountants Ireland welcomes the timely publication by the Central Bank of Ireland (CBI) of the Individual Accountability Framework (IAF) draft regulations and guidance, and the certainty of action required for Irish financial services firms, writes Níall Fitzgerald.
The framework contains measures, including conduct standards and prescribed responsibilities, designed to enhance customer-focused cultures and embed responsibility and ethical behaviour across financial services in Ireland.
While it promotes the necessity for cultural change, the CBI agrees that more is required to achieve this. Insights from the introduction of similar measures in other jurisdictions show that an individual accountability regime better impacts on organisational culture when supported by:
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Promoting individual accountability but emphasising collective decision making:
Being accountable as individuals for actions and behaviour is not new. Professionals are accountable to codes of ethics. There are also many laws and regulations that hold individuals accountable for their roles in an organisation, such as fiduciary duties of directors. However, many organisations thrive on collaboration, teamwork and diversity, which improve collective decision-making. Individual accountability is not designed to override this, and emphasising other positive behaviours, such as these, supports the IAF’s objectives.
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Promoting a ‘just culture’ and avoiding a ‘blame culture’:
A blame culture focuses on identifying culprit/s, penalising them, and moving forward on the assumption that the issue/s won’t happen again because an example has been set. A just culture acknowledges that mistakes and underperformance can occur, but that both are better addressed by reflecting on what went wrong and focusing on what can be learned to improve future outcomes. Individual accountability exists in both scenarios, but the latter will have a more positive impact amongst the workforce, helping achieve the objectives of the IAF.
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Promoting trust and integrity:
Certain informal reactions to a regime such as the Individual Accountability Framework can undermine its objectives. In some jurisdictions individuals with prescribed responsibilities prepare personal compliance files, privately maintained outside of the firm’s documentation system. A ‘cover your actions’ (CYA) approach developed in those jurisdictions, whereby there is a tendency to give advice formally (e.g. in writing), which would differ if given informally (e.g. verbally). Notwithstanding the risk of breaching privacy and confidentiality rules, these informal practices are indicative of low levels of trust and integrity within a firm. Embedding a culture of psychological safety can deter this risk and foster greater trust within the organisation.
Níall Fitzgerald, Head of Ethics and Governance, Chartered Accountants Ireland
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