For the first time, Lloyd's Project Rio places culture at the front and centre of a set of principles-based standards syndicates must strive to achieve.
We can all point to examples of toxic corporate cultures which have been the undoing of some of the world's biggest brands. These include excessive risk taking and cultures of blindness that brought down Lehman Brothers during the Great Financial Crisis and contributed to the Volkswagen emissions scandal to cultures of bullying and harassment, some of them uncomfortably close to home.
Yet for too long the importance of corporate culture has been sidelined. Treated as an intangible aspect of the business that is considered too esoteric to effectively regulate compared to other measures of governance and performance.
With its Project Rio Principles for Doing Business at Lloyd's, the Corporation is challenging this perception. In an era that has seen and is continuing to see a profound shift in the importance assigned to inclusion & diversity and ESG, Lloyd's has sent a clear message that market participants must seek to create and maintain diverse, ethical and authentic cultures by, among other things:
Demonstrating leadership focus on fostering an inclusive, high-performance culture;
Ensuring behaviour expectations are clear and there is zero tolerance for inappropriate behaviour;
Encouraging speaking up (and that there are appropriate tools for employees to do so);
Ensuring diverse representation within their workforce and leadership population and be inclusive in how talent is recruited and retained to reflect society and their customers, and
Understand their employee population, collecting appropriate data and taking action to create an inclusive employee experience.
It is essential to increase accountability for culture at a firm level, believes Lloyd's. "We have called out culture as a principle on its own to reflect the momentum behind the many initiatives to improve culture across the market," reflected Kasey Brown, Culture and Engagement Lead at Lloyd's in a market briefing. "We recognise that culture is unique, it can be a source of competitive advantage for firms but we also recognise that culture can be an organisation's downfall and we don't want that to happen."
The market wants syndicates to be more "intentional" about culture and proactive in shaping and managing their culture so firms can attract and retain the talent they need to deliver on their strategy. This is because encouraging greater diversity helps to avoid groupthink and fosters greater innovation.
For firms that can demonstrate they are taking concrete steps to create and maintain inclusive and high-performance cultures, there are obvious competitive advantages. There is a growing evidence of research into the strong correlations between the ability of organisations' that prioritise ethnic and gender diversity (including balanced boards) to outperform their peers. Research shows that inclusive teams make better decisions 87% of the time.
Beyond these competitive benefits, Lloyd's has also committed to taking a lighter touch approach to syndicates that score highly across the dimensions it considers most critical, culture being one. The easing of the market's compliance burden should help free up management time and resource to focus on growth and innovation.
The market has indicated it understands each firm's approach to meeting the principles outlined under Project Rio will, appropriately, vary depending upon the size and maturity of the organisation. But as always, the tone must be set from the top.
In order to foster an environment in which colleagues feel adequately comfortable to share their personal data, it is essential to communicate what the benefits are and how their information is being used. The workforce must first understand the why, and then the how.
Active allyship programmes help to foster cultures of inclusion and acceptance. Returner programmes are among the more innovative recruitment methods which can help to tap into more diverse talent pools, supporting women - for instance - who have taken a career break to start a family. Recognising the importance of transferable skills as the industry evolves allows firms to look far beyond the confines of EC3.
Successive CEOs of Lloyd's have pushed the market forward in raising minimum standards for performance, and culture is now recognised as a critical dimension to that. It is a journey and will not happen overnight. But if, as a business, you can demonstrate you are instilling a positive and authentic culture with proper representation of inclusion and diversity across your team and board, the Corporation expects your organisation will grow and drive value over time. And, crucially, it will give you the space to get on with delivering on your strategic goals.