R01 Corporate culture and leadership: free practice questions

1. Question 1 of 5

   Which of these is one of the six key cultural drivers the FCA believes influence behaviour and consumer outcomes?

   Option A: Share priceOption B: Brand coloursOption C: Office locationOption D: Reward

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   The answer is D: Reward

   The six drivers are leadership; strategy; decision making and challenge; controls; recruitment, training and competence; and reward.

   Why the other options are wrong

   A

   Share price isn't a cultural driver.

   B

   Branding isn't a cultural driver.

   C

   Office location isn't a cultural driver.

2. Question 2 of 5

   According to the FCA, what should management incentive schemes avoid?

   Option A: Any link at all between pay and individual performanceOption B: Rewarding staff for the quality of the advice they giveOption C: Heavy emphasis on profit or growth over fair treatmentOption D: Being transparent about how bonuses are calculated

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   The answer is C: Heavy emphasis on profit or growth over fair treatment

   Incentive schemes shouldn't place heavy emphasis on profit, income, cost cutting or growth; fair treatment of customers must carry significant weight. Reward frameworks should be transparent and recognise quality.

   Why the other options are wrong

   A

   Schemes can be linked to performance, appropriately balanced.

   B

   Rewarding quality is a positive indicator.

   D

   Transparency is a positive indicator.

3. Question 3 of 5

   Which is an example of good practice in leading a culture of fair treatment?

   Option A: Passing key messages to a remote call centre via junior staff onlyOption B: Having a customer charter that front-line staff don't followOption C: Letting staff give anonymous feedback on fair treatment failingsOption D: Ignoring conflicting views from directors about adviser quality

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   The answer is C: Letting staff give anonymous feedback on fair treatment failings

   Allowing anonymous staff feedback on fair treatment was cited as good practice, along with clear CEO messages and acting firmly on misconduct.

   Why the other options are wrong

   A

   Inconsistent delivery of messages was poor practice.

   B

   Processes inconsistent with the firm's strategy were poor practice.

   D

   Failing to deal with differing views on adviser quality was poor practice.

4. Question 4 of 5

   What does the 'decision making and challenge' driver require?

   Option A: Decisions made by one senior person, without questionOption B: Every significant decision approved by the FCA firstOption C: Enough challenge to policies, from staff or customersOption D: Decisions based solely on short-term profitability

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   The answer is C: Enough challenge to policies, from staff or customers

   Policies need enough challenge through a formal process, in an environment conducive to challenge by staff or customers, with customers' interests balanced against shareholders'.

   Why the other options are wrong

   A

   Unchallenged decision making is the opposite of the driver.

   B

   The FCA doesn't approve firms' decisions.

   D

   Customer interests must be balanced, not ignored.

5. Question 5 of 5

   How should governance, risk management and compliance (GRC) be viewed?

   Option A: As one connected system of corporate governanceOption B: As optional for smaller firms to considerOption C: As three separate departments with no connectionOption D: As a function that sits purely within IT

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   The answer is A: As one connected system of corporate governance

   GRC is increasingly seen as part of a whole corporate governance system that communicates values, collects information and connects risk to compliance and ethical issues on a principles basis.

   Why the other options are wrong

   B

   Good governance applies to all firms.

   C

   They're seen as connected.

   D

   GRC isn't purely IT.

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