Hector Sants, the head of the UK's Financial Services Authority (FSA), argued that regulators should assess companies' culture and ethics, not just focus on rules. He said regulators should focus on identifying unacceptable cultures and ensure companies hire ethical managers and have proper governance. Harding & Yorke, a firm that measures corporate culture through employee feedback, believes their new tool could help identify unknown risks by monitoring feelings over time, as indicated cultural issues may emerge before major problems. They offered to demonstrate their approach to help the recipient's risk assessment and compliance efforts.

1. Harding & Yorke
Hardi ng & York e, T he Old St abl es, Manor Farm, Appl ef ord-on-Thames, O xf ordshi re, O X14 4PA.
Office: + 44 (0) 1235 845 700 Mobile: +44 (0) 7887 782875 W ebsite: htt p:// www.empath y.co.uk
Regist ered i n England N o: 5876446. VAT No: 889 4220 83.
Relevant to: CEO, Chairman’s offices, Risk Professionals, Marketing Directors
July 2010
Dear Linked-In User,
Thank you for looking at this information. If you have not already done so please read the
paper called ‘Uncertainty Matters: Unknown Risk’ which gives further information.
In June 2010 it was been reported that Hector Sants is going to stay on at the FSA before
transferring to the Bank of England to be its first chief executive of prudential regulation and
to become deputy governor. In a speech at the Chartered Institute for Securities &
Investment (CISI) conference in London entitled, 'Do regulators have a role to play in judging
culture and ethics?', Sants discussed his view that “many of the causes of the financial crisis
were deeply rooted in behavioural issues”.
He said that, "Historically, regulators have avoided judging culture and behaviour as it has
been seen as too judgemental a role to play. However, given the issues we continue to see
over time, I believe this one-dimensional approach has to be questioned. Every other aspect
of the regulatory framework is under scrutiny and we should not shy away from debating the
culture question."
The FSA chief executive commented that the focus for regulators should not be to define one
'acceptable culture' because there are many different forms a positive culture can take.
Rather, regulators should focus on what an unacceptable culture looks like and what
outcomes that drives. He outlined the mechanisms by which regulators could intervene to
ensure firms have the right cultures:
• ensuring firms hire managers who act with integrity, by judging competency but also
ensuring they understand the need to act with integrity, deliver the right culture and are
equipped to do so;
• ensuring firms have the right governance and behavioural framework to facilitate good
judgement by their staff; and
• assessing the actions against society's wider expectations not just shareholder value.
Harding & Yorke, possibly best known for identifying a financial correlation between how it
feels to be a customer and a companies’ profitability have developed an easy to implement
tool which helps organisations understand and measure their culture. The outputs from this
provide useful indicators for risk assessment in the areas which Sants suggests.
Empathy Measurement
Our new approach assists in identifying unknown risks – we gather data
intelligence from employees, customers, partners, suppliers and shareholders and Empathy Benchmarking
monitor it over time. It is based on a research methods developed over the past 15
years in the measurement and assessment of Empathy, we collect insight into how Empathy Strategy
and why each target group feels when interacting with the company. Risk Empathy Coachi ng
assessments can be categorised by unrelated questions within a simple and
innovative online questionnaire. Empathy Traini ng
Risk Assessment
...../continued
Interim Management
Harding & Yorke is the trading name of Empathy Services Limited

2. You only need to look at recent developments with many well-known brands receiving record
fines for serious failures to see the impact on company performance, reputation and
compliance. If we recognise that ‘gut’ feelings are an early indicator of likelihood and intent
then the question is, how could things have been different had these companies been able to
act on a identifiable gut feel earlier?
In a recent article by the Sunday Times, “Risk control rises to the top” it was highlighted how
company boards are being forced to give more power to executives who monitor the dangers
to their businesses, and the need to focus on the big issue of behaviour more than rules,
which are seen as bureaucratic and inhibiting growth.
We would welcome the opportunity to discuss how our new and exciting approach to risk
assessment could be of benefit to your business. I will call your office over the next couple of
weeks so that we can establish 1) your level of interest in knowing the unknown and 2) if and
when we can demonstrate this new and intuitive approach to you. In the meantime please
do not hesitate to contact me to arrange an earlier appointment.
We are really excited by this and know that you will be too!
Yours sincerely
Stuart Lamb
Enterprise Consultant
Stuart.Lamb@empathy.co.uk Mobile: 07887 782875
Harding & Yorke is the trading name of Empathy Services Limited