Accelerating Diversity

Today we are publishing our regular report on the demographics of senior leadership roles in the financial services industry. It coincides with last Saturday marking International Women’s Day (with the theme of ‘Accelerate Action’) as well as today’s event at the University of Galway hosted by the Irish Society for Women in Economics. (And last Friday, I joined a panel at the ECB on the role of financial literacy in central banking and closing the gender gap in financial education.) 

Today’s publication tells us that the rate of female applicants for some of the significant leadership roles within regulated financial firms across the industry has steadily increased from 16 per cent in 2012 to 34 per cent in 2024.  This is the first time representation from females applicants has exceeded one-third and there are other positive trends in female representation in certain roles such as in risk management and at board level in the banking sector (where female representation in directorship roles is up 7 per cent to 40 per cent) and Chair roles (up 18 per cent to 42 per cent) year on year).

Although these are encouraging and welcome developments, the report serves as a timely reminder that more needs to be done to encourage greater diversity – in all its forms – in Irish regulated firms.  

The reasons are straightforward.  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. We know that firms which are sufficiently diverse and inclusive are also better able to be proactive and forward-looking in managing risks and uncertainties facing their organisations and their customers.  We know that diversity, whether of gender, age, ethnicity, educational and professional background, among other characteristics, is critical to developing an effective culture. 

And our expectation is that, like all cultural change, diversity and inclusion has to be led by the most senior leaders within the organisation. 

And while there has been progress, we know that much more needs to be done to ensure that the culture within the firms we regulate is sufficiently diverse and inclusive to support better run firms, which is essential when it comes to protecting consumers.

So why does diversity matter more than ever right now?  Three words: diversity of thought.

For me, and for us at the Central Bank, diversity of thought is critical to ensure a range of perspectives are considered and evaluated to help policymakers, firms and businesses navigate their way through uncertainty. 

I firmly believe that diversity strengthens leadership.

Diversity and inclusion strengthens us as individuals.  It helps us to understand the present, better anticipate the challenges and opportunities that may arise in the future and better manage the pace, complexity and cross-cutting nature of change.  It makes us stronger, more resilient and insightful. And of course inclusive diversity also strengthens both our individual organisations and all of us in our collective roles.

Organisations that better reflect the societies they serve are stronger and more successful than those that don’t. So we need to bring diverse thinking, ideas and perspectives to find better solutions than we would on our own. 

And our society looks very different to the way it did a generation ago.

We’re more diverse, more connected, more aware and conscious of our place in the world than ever before and we have different aspirations, and different expectations of government and public services. Our employment comes from different businesses, our products go to different markets, our entrepreneurs are starting different companies, and our young people have different expectations of what it means to succeed in life.

These are big shifts (and that’s without contemplating the implications of the changing geopolitical landscape).

But this isn’t just a story about challenge. It’s also about opportunity. For all of us, the pace of change has increased exponentially. We used to be able to take time to look at an issue, formulate a solution, roll it out and evaluate it over years. The world we live in now needs ideas and results in real-time (or even quicker!), and governments, institutions, policy makers and businesses need to be responsive in order to deliver successfully.

The business case for diversity is clear. Many of us adopted it as a strategy to raise performance some time ago, and yet we still see that progress has been slow. 

So how do we adapt to our changing society?

All organisations need to seek out wider perspectives.

Our past shapes our capacity to imagine. It determines the perspectives we bring to our analysis.  Any organisation can strengthen itself by bringing different perspectives to its work.  Because as the world changes, it is the new and not the old that matters.  We need to look to the future rather than reflect on the past.  We want to learn from history, not be trapped by it.

Diversity is the key to bolder, more innovative thinking. If we can deepen diversity, if we can leverage difference and harness it effectively, it will generate a real advantage, in the form of fresh ideas that work for all of us. And maybe it might just help us to really ‘Accelerate Action’.

Gabriel Makhlouf