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In a speech delivered at a recent industry conference, James Hennessy, Head of the Governance and Culture Reform Initiative at the Federal Reserve Bank of New York, highlighted the progress made in addressing organizational culture within the financial services industry over the past decade. 

"Culture has evolved from a somewhat nebulous topic to one that is considered a central component of risk management and business success," Hennessy said. “Looking ahead, technological advances promise to enhance how culture data are collected and interpreted, thereby supporting better diagnosis and interventions, and more desirable outcomes.”

Hennessy discussed the NY Fed Governance and Culture Reform Initiative's three strategic pillars: Awareness & Dialogue, Education & Research, and Supervision & Governance. In its work in these areas over the past year, the Initiative has gathered several key insights around driving effective culture change. These include:

  • The role of culture assessments, and especially those involving real-time data, in facilitating culture transformation;
  • How communicating clear expectations for culture helps employees understand the benefits of culture change; and
  • Why psychological safety is essential to facilitate bottom-up communication;
  • What managers can do to serve as "culture carriers" to normalize these speak-up behaviors; and
  • The importance of non-financial incentives — including gratitude, respect, and purpose — in promoting desired behavior.

"I am heartened that so many members of the industry see culture as an important component of its success," Hennessy concluded. “I encourage your efforts to make progress and build healthier cultures in finance on a global scale.”

Read more about the NY Fed's Governance and Culture Reform Initiative in James Hennessy's Compendium contribution from 2020 and in the piece he coauthored with Thomas Noone, Counsel and Assistant Vice President at the NY Fed, from the 2022 Compendium.

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