Gabriel Makhlouf: Inclusion, diversity, and the pandemic
Blog by Mr Gabriel Makhlouf, Governor of the Central Bank of Ireland, 5 October 2020.
* * *
This blog was originally published on 22 September by the Institute of Directors (IoD) in
Ireland.
The COVID-19 pandemic has resulted in turmoil and uncertainty around the world, and
presented challenges to households and communities that were probably unimaginable at the
start of the year. Business leaders are faced with significant disruption to their operations and
have to manage changes to how and where work gets done, as well as ensuring the health and
safety of their employees and customers. Rather than write about what the Central Bank of
Ireland and the ECB are doing to help the economy through the crisis, I'd like to use this blog to
encourage all IoD members to not forget the importance of diversity and inclusion (D&I) as they
plan ahead.
Why Diversity and Inclusion (D&I) Matters
In the face of so many pressing priorities, it's worth being clear as to why D&I is important. In
brief, it's because there's a growing body of research that confirms the benefits that inclusive
diversity can bring to complex problem-solving, decision-making, governance, risk management,
attracting talent, employee engagement and more. I believe that advancing diversity and fostering
inclusion matters now more than ever.
First, we know different backgrounds, perspectives and experiences bring benefits to complex
problem-solving and there is no shortage of novel and complex problems in the current
environment. We have seen this within the Central Bank itself. Cognitive diversity is the varied
ways in which people think and the different experiences that they can draw on. This diversity of
thought adds a range of perspectives that can help organisations and businesses to chart their
way through uncertainty. Economists, for example, are taking a keen interest in epidemiology to
try and better understand the implications of the pandemic. We are also looking to
history and psychology .
Second, there is evidence emerging that COVID-19 is having a disproportionate impact on
certain groups in society such as women, people from ethnic minority backgrounds and others
from socio-economically disadvantaged backgrounds. In particular, the movement of so many
employees to remote working poses a challenge to their "inclusion" in idea-development and
decision-making. Organisations need new and creative ideas as they adapt to the 'new normal'
and they should be looking to address the "inclusion" challenge as remote working continues or
as childcare arrangements (for example) are disrupted.
Finally, how leaders and organisations act during a crisis, and what they choose to prioritise,
reveals a lot about their true values and culture. By continuing to focus on diversity and inclusion,
leaders are sending a clear message to their employees and wider stakeholders that these
genuinely matter. I have long believed that diversity in itself is not enough. It must be supported by
an inclusive culture that optimises the value that difference can bring. Inclusion can be a difficult
concept to define. For us at the Central Bank, it is about creating a workplace that allows people
to "bring their whole selves to work". It is grounded in fairness, respect and belonging. It is about
ensuring that everybody has the opportunity to contribute and develop regardless of their
background. And it is about ensuring that every voice is heard.
The implications of the pandemic for inclusion are not of course all one-way. There could be
potential benefits for office workers as working from home may give them useful additional
flexibility to shape their schedules around their responsibilities outside of work. It might also
support greater workforce participation from people with disabilities or parents and carers for
example. But there are also potential difficulties for staff who may not have the option to work in a
dedicated home-office, or with poor connectivity. And of course for sectors where working from
home is not an option, there are a host of challenges given the need for physical distancing. How
individuals interact and collaborate is also changing, and it will be a challenge to ensure that staff
don't feel isolated without the social interactions we are all used to, or the ability to simply
approach a colleague to ask for help or advice. I think adaptability is essential to tackling these
challenges and indeed McKinsey analysis suggests that when companies invest in D&I, they are
better placed to create more adaptive and effective teams.
What Are We Doing About It?
D&I is an important focus for the Central Bank, for ourselves and also for the firms we regulate.
Deputy Governor Donnery has outlined how "diversity of regulated firms is something upon which
we in the Central Bank of Ireland have started to focus in a significant way" and Deputy Governor
Sibley has also has explained why, "a lack of diversity at senior management and board level in
organisations is a leading indicator of elevated behaviour and culture risks, and consequently
prudential and conduct risks."
We are, to use Deputy Governor Donnery's words, "placing a spotlight on this issue, and intend
to keep it there" including by publishing a range of reports that focus on D&I, such as
July's Thematic Assessment of Diversity & Inclusion in insurance firms. In our assessment, we
found that some progress was being made in the recognition by insurers of D&I's importance but
it was slow, there was a lack of join-up between diversity and inclusion policies and decisions
being taken at the most senior levels of firms and there remains a serious imbalance in gender
diversity across insurance firms.
We report annually on the demographics of the applications received from firms for Central Bank
approval for certain senior roles in financial firms in Ireland. Last March's report saw some
improvement in the gender balance of applications in certain sectors but the pace of change
remains disappointing. In our view, more work is needed to enhance diversity at senior levels
across the entire financial services industry, not least in those roles that are responsible for
driving revenue, such as chief executive officers and heads of business lines, of which 85% roles
are held by men.
Given the importance of diversity and inclusion to the culture and resilience of the financial
sector, we will continue to place a spotlight on the need for improvement.
What about the Central Bank itself?
At the Central Bank, we believe that a diverse workforce is fundamental to achieving our vision of
being trusted by the public, respected by our peers, and providing a fulfilling workplace for our
people. We want a workforce made up of colleagues with different backgrounds, experiences,
and perspectives. We want our people to reflect society in Ireland and for us to look to harness
the benefits of difference, as well as - through our own actions - to influence positive behaviours
in the financial services industry. We are committed to attracting diverse talent in all its forms,
creating an inclusive environment, enhancing our focus on ethnic and cultural diversity,
supporting gender identity and expression in the workplace and expanding the D&I learning
offering to all managers and staff. We will continue to report on our progress to achieving our
goals.
Conclusion
It's important for the Central Bank to have people with the intellectual horse-power to dig deep
into complex issues but it's also important for them to have the ability to see, understand and
solve them from a range of perspectives. We believe that applies to other organisations too. A
successful economy needs to draw on the strengths and capabilities of all its people. It's people
who make an economy, who create and run its institutions, who innovate and run its businesses,
and who create its jobs. And in uncertain times, bringing together the people with the most
diverse set of skills and experiences increases an organisation's ability to meet the challenges it
faces.
Gabriel Makhlouf