Organisations with the right culture are less likely to suffer intervention from the Australian Securities and Investments Commission (ASIC), Chairman Greg Medcraft says.

He told a Law Council event in Melbourne recently that cultural change will have a long-term impact on the financial services industry “in a broader way than deterring or disrupting isolated misconduct”.

“We hope cultural change will reduce the need for regulatory intervention,” he said.

“However, we see cultural change not as a panacea, but certainly as something that will contribute to enhancing consumer outcomes.”

ASIC’s surveillance will examine culture to identify systemic conduct issues.

“We will be looking out for cultural indicators, such as policies not lining up with what people say and do, or a lack of action when things go wrong that suggests we should take a deeper dive to look for poor conduct,” Mr Medcraft said.

“This might mean a more intensive surveillance or a broadening of the scope of our surveillance.”

If ASIC uncovers poor culture, it will notify the organisation, then take action if changes are not made.

Mr Medcraft says a good culture puts customers first, and should be supported by the “three Cs”: effective communication, encouraging challenge and guarding against complacency.

“Organisations need to set the right tone and then ensure it is effectively communicated.

“That means making expectations about conduct and values clear and consistent, and proactively reiterating them across all levels of the organisation.”

He says businesses must challenge current practices and foster an environment in which employees are encouraged to raise concerns.

“There is a danger in complacency. I mean thinking that it hasn’t happened yet, so it won’t happen.”

The regulator will not dictate organisations’ culture, Mr Medcraft says.

“We encourage firms to take action to address culture themselves.”