We’ve talked a lot in the past about diversity in compliance. This is a sector that has fared well where others in financial services have faced criticism, particularly in the light of the Gender Pay Gap (GPG) results. Now we turn to risk.
We have seen a notable trend in the drive to find more females within risk management jobs, particularly in the quantitative area where there is a current lack of women relative to other areas of risk.
We want to show the sceptics that the hiring of women extends beyond a knee jerk reaction to the GPG fall out, simply remedying a PR issue and fulfilling a quota. And further still, address the generalisation that the commercial benefits that come from diversity are due to the stereotype of women being calm and cautious while men are egotistical and prone to excessive risk-taking.
Exploring the hypothesis: Diversity = profitability + security
The financial crisis of 2007 has brought with it a decade of surmising how it could have been avoided. Multiple studies have been carried out testing various measures of financial performance, all concluding that gender diverse firms have outperformed those dominated by males. A study entitled ‘Braving the Financial Crisis: An Empirical Analysis of the Effect of Female Board Directors on Bank Holding Company Performance’ published in March 2016 went as far to say that not only did the bank holding companies see a direct correlation with the number of female directors and performance but those with at least three female directors ‘braved the crisis better’.
A common theory suggests that ‘groupthink’, the psychological phenomenon that occurs when a group conform to the same point of view is to blame. While this is great for group harmony it is detrimental to a fully considered decision.
It is this variety that is key. Throughout our extensive network we have met thousands of men and women who have a unique set of characteristics and skills that make them brilliant at what they do. Attributes such as tenacity, communication, attention to detail, logic and foresight are not defined by gender but an individual.
The problem, and what these studies have picked up on is that where critical decisions are being made by a wholly homogeneous group, strains of commonality can culminate. How much a person’s age, gender or ethnicity affects their experience and perspective will vary but it is this set of unique perspectives that can change the dynamics of a decision making process and overcome an unconscious bias.
What does this mean for the future of diversity in risk?
On International Women’s Day, the Institute of Risk Management (IRM) gathered 20 risk professionals (male and female) to discuss gender diversity. They, like us have noted that more than ever, women are choosing careers in risk management, particularly in the quantitative field but that it ‘thinned considerably the further up the management ladder’.
It is for businesses now to determine how they can keep women in their organisations and we are seeing positive moves in this space. Many firms are starting career development initiatives and are having meaningful conversations about creating a culture where everyone feels heard and that they have equal opportunities. Importantly and increasingly we are seeing firms consider flexible working which is a critical factor for women who are returning to work after having a family. If this continues to gain momentum, we will start to see more women in leadership positions and this in itself will help shape our future organisations’ diversity cultures.
We see how important diversity is and financial services, like any other sector rely on performing to the best of their ability. With a wider market and more diverse talent pool, less emphasis will be put on stereotypes. We never want a person to have to question whether they have (or indeed haven’t) been successful in getting a role for anything other than the measure of their skills, expertise and character.
We have a unique view point of diversity in the risk market. If you would like our advice, I’d be happy to discuss this with you.