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On a tour of the Bank of England recently, Her Majesty Queen Elizabeth II took the opportunity to discuss the banking crisis with officials. As part of the discussion Mr Sujit Kapadia, one of the Bank’s financial services committee, attempted to answer the question which Her Majesty had posed to the LSE in 2008, namely “why did nobody notice it”.
In answering the question Mr Kapadia gave three reasons:
After questioning officials on what was being done to prevent a crisis in the future Her Majesty remarked that “people got a bit lax” and also suggested that part of the problem may have been that the Financial Services Authority had not had the necessary powers to act.
Whilst there is nothing new in Mr Kapadia’s explanation for the crisis, it is interesting in that it could equally apply to many business failures. Businesses now depend of a supply chain which can reach around the world and the failure of any one of its parts can lead to failure elsewhere. Similarly, once complacency, the feeling of “we’re doing all right so we need do nothing more” creeps in a crisis inevitably follows.
Taking time out to conduct a regular cultural audit can highlight problems before they take hold, removing the complacency factor and suggesting areas which need strengthening. A cultural audit of the UK’s banks and financial systems may not have prevented our catching a cold when the world shivered but it might have mitigated some of the loss.