Mossack Fonseca is (quietly) closing

Just squeezing onto the end of the radio news this morning, and not even registering on the BBC news website as I write, is the news that Mossack Fonseca will close.  I am rather surprised it has hung on this long.  If the name does not ring a bell then maybe The Panama Papers will.  Mossack Fonseca was the law firm from which those papers sprang – exposing to the world the way that taxes can be avoided if you know how.

The firm apparently blames ‘financial and reputational damage’.  I am struck that they lump the two together as if they share the same root.  Surely their financial problems stem from the reputational damage done by the leaking of the papers that then caused a collapse in their revenue?  It is the same trigger that caused Bell Pottinger’s (more precipitate) demise.  With a reputation shredded it is difficult to continue to earn revenue in a Professional Services company.

All this is self-evident enough.  By happy coincidence a colleague has just sent through a copy of the FCA paper on transforming culture in financial services.  I confess that I have not read it in any detail yet, but it is all part of the FCA’s stated effort to “raise management of ‘culture’ as a leadership discipline to the level of rigour and importance as ‘strategic planning’ and ‘risk management’”.

The FCA’s words are welcome.  They recognise that an organisation’s culture is at least as important to organisational success (and long-term survivability) as an effective strategy.  In creating and preserving an organisation’s reputation it is even more important.  Taking the most basic definition of culture ‘as the way we do things around here’, reputation is the external view of that culture.  An organisation has a reputation of ‘cutting corners’, ‘taking risks’, ‘delivering on promises’, ‘being innovative’ etc because that is the way the company culture operates – the way things are done.

Companies take an awful lot of effort to protect their reputation.  PR agencies, lawyers, risk managers and many others are all involved and yet too often they are having to deal with a bomb that has either exploded already, or on which the clock is ticking inexorably.  Better still would be to tend to the root cause of their reputation – the culture of the company as witnessed by the behaviours of its employees.  This would truly put them to the left of the bang.

There is one other angle to the FCA’s words worth a mention.  It is the acknowledgement that culture can be managed – and it needs leadership to do it.  Culture may be difficult to change or influence, but it can be done.  It takes a conscious focus by leaders and a personal commitment by the leadership team to demonstrate the desired behaviours.

A closing reflection on reputation and behaviours.  The Mossack Fonseca story was run on the Radio 4 Today Programme  just before the closing item.  It came from the US and was the tragic story of a woman convicted of second degree manslaughter because her boyfriend had persuaded her to shoot him in the stomach.  He was determined to prove that the thick book he was holding would protect him from the shot – with fatal consequences.  Neither of their behaviours does much to enhance the reputation of the gun lobby.

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