The financial services industry has experienced a profound transformation as a result of prioritizing Diversity, Equity, Inclusion, and Belonging (DEIB). With a growing recognition of the significance of diversity in fostering innovation, driving business performance, and addressing systemic biases, financial institutions have made concerted efforts to create more inclusive and equitable environments.
Inclusion and belonging initiatives have not only led to increased representation of underrepresented groups, enhanced customer service, attracted top talent, and improved risk management practices, but can also generate financial returns. A 2019 McKinsey & Co. study revealed top-quartile companies for racial and gender inclusion outperformed those in the fourth quartile by 36% in profitability. By embracing such initiatives, the financial services industry has reimagined its approach to talent acquisition, organizational culture, and decision-making, thereby propelling the industry toward greater resilience, growth, and positive societal impact.
The impact on the financial services industry is only beginning.
- Increased representation: Inclusion and belonging initiatives have led to a greater focus on diverse representation within financial services firms. This includes promoting diversity across various dimensions such as gender, race, ethnicity, sexual orientation, and disabilities. By having a more diverse workforce, financial institutions can bring in different perspectives, experiences, and ideas, which can contribute to better decision-making and innovation.
- Enhanced client service: Financial services firms that prioritize such initiatives are better positioned to serve a diverse range of clients effectively. Understanding and reflecting the needs and preferences of different customer segments can lead to improved products, services, and customer experiences. These initiatives can also help address biases and discriminatory practices that may have existed in the industry, ensuring fair treatment and equal access to financial services for all.
- Talent acquisition and retention: DEIB efforts in the financial services industry have become important for attracting and retaining top talent. Many individuals, particularly from younger generations, seek workplaces that prioritize diversity, equity, and inclusion. One way to signal commitment to DEIB is to have diverse representation during the recruitment process. Of the employees Kanarys’ surveyed within financial services firms, 69% agreed there was diversity among the people met during the interview process. By fostering an inclusive environment where all employees feel valued and supported, financial firms can attract a broader talent pool and reduce turnover rates.
- Compliance and regulatory requirements: Regulatory bodies have recognized the importance of inclusion and belonging in the financial services industry. Some jurisdictions have introduced regulations or guidelines that encourage or require firms to disclose their diversity data and take steps to address any disparities. Meeting these compliance requirements not only helps financial institutions avoid penalties but also demonstrates their commitment to a welcoming workplace, improving their reputation and trustworthiness. Indeed, not only has Kanarys’ found that the financial services industry communicates information about their DEIB goals (81%) more than the general workforce (76%), but also employees within the financial services industry are reporting higher endorsement on perceptions of organizational commitment to diversity (84%), equity (80%), and inclusion (86%) compared to the total workforce (82%, 75%, and 79%, respectively).
- Business performance and innovation: Studies have shown that diverse and inclusive organizations tend to outperform their peers in terms of financial performance. The presence of diverse perspectives can foster creativity and innovation, leading to the development of new products, services, and business models. By embracing inclusion and belonging initiatives, financial services firms can tap into a wider range of ideas and strategies, driving growth and staying competitive in a rapidly changing industry.
- Risk management and decision-making: DEIB can play a crucial role in risk management within the financial services sector. Homogeneous groups tend to exhibit groupthink, where diverse perspectives are suppressed, and critical viewpoints may be overlooked. As such, it is important employees not only feel comfortable expressing opinions or concerns, but also that their opinions and concerns are valued by their organization. Of employees surveyed by Kanarys’ in financial services firms, 75% agreed they felt comfortable expressing their opinions without fear of negative consequences. By embracing diversity, equity, and inclusion, financial institutions can encourage open discussions, challenge assumptions, and make more informed and robust decisions. This can help mitigate risks and improve overall governance.
Overall, the impact of inclusion and belonging intiatives on the financial services industry has been transformative, reshaping organizational cultures, improving customer service, attracting top talent, ensuring compliance, fostering innovation, and enhancing risk management practices. By embracing them, financial institutions can create a more equitable and inclusive industry that benefits both their employees and their customers.
Next time, we’ll discuss inclusion and belonging initiatives that financial firms can undertake.