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This case study looks at the impact on the international finance industry and big business of research conducted at Heythrop College by Catherine Cowley. Cowley's work is transforming the ethical framework with which some of the most powerful corporations in the world operate and how they understand their role in society, as well as influencing the direction and content of the public debate over the ethics of finance and business.
The Personal Finance Research Centre (PFRC) at the University of Bristol conducted research between 2004 and 2006 to develop the UK's first quantitative baseline survey of financial capability. The survey was a significant departure from previous methodologies in that it not only assessed knowledge, but also skills and behaviours. The survey results became the basis for the Financial Services Authority's (FSA) understanding of financial capability in the UK, and PFRC's analysis of the survey findings were used to set priorities for its National Strategy for Financial Capability, worth £90 million. One of the findings of the survey was that young people are much less financially capable than their elders. As a result, a priority within the National Strategy was to educate young people. A number of programs were put in place including Learning Money Matters, which offered free advice, support and resources to schools between 2006 and 2011. The program successfully reached over 2 million young people in 4,259 schools, and in 2011 economic wellbeing and financial capability became a statutory part of school curriculum in England. Overall, the FSA strategy was deemed successful, exceeding its target of reaching 10 million people. International bodies regard the FSA's baseline survey as a model for their own work and the UK methodology has been adopted by countries including Ireland, Canada and the Netherlands. The World Bank has led a substantial research and evaluation programme in low and middle income countries that uses the UK approach.
A body of research has informed government bodies, policy makers and other agencies on consumer interactions with retail financial services markets. Specifically, it has informed formulation of new policies in the area of simple products and banking standards that are now being put into effect as new policy initiatives.
The impact detailed here has been on policy development and implementation in the area of consumers and financial services. The body of academic research has gained traction and credibility with relevant stakeholders due to academic endorsement and wide scale dissemination efforts. This has allowed researchers a significant input into consultation processes, campaigns and a parliamentary commission. Such inputs have helped formulation of new policies in the area of simple products and banking standards that are now being operationalized as new policy initiatives. Thus, a direct chain of impact exists between the initial research and the final outcomes, which influences numerous financial services decision makers and banking customers.
Research from the Open University Business School (OUBS) on the practices of traders and the link between emotions and financial decision-making has underpinned developments in a new client education platform at a leading European bank, Saxo Bank. The bank has created training tools to support improvements in client decision-making and trading and made these available on its public portal to its own clients and the public as part of its value proposition. The research has also led to development of the BBC Lab UK Big Money Test which was featured in the BBC television series Watchdog. The research is influencing policy makers in the UK and internationally and has been instrumental in the formation a new private-sector firm.
LSE research on endogenous risk has had impact at both the macro and micro level. At the macro level, it provided input for the design of the counter-cyclical measures and systemic risk surcharges in the Basel III regulations in financial markets. It also provided a significant input to the G20 agenda on financial stability. At the micro level, the research has had a significant role in shaping the thinking and recommendations of the UK Foresight Report on "The Future of Computer Trading in Financial Markets". Through this, the work had a direct impact on Markets in Financial Instruments Directive (MiFID) II, the EU legislation that governs how EU financial service markets operate. The original EC proposal for trading halts in volatile markets — Minimum Resting Times (MRT) — to regulate high frequency trading was dropped and the Foresight proposal of time stamps based on synchronised atomic clocks across trading venues was adopted.
Between 2008 and 2011 Essex researchers were funded by the Financial Services Authority (FSA) to investigate the determinants and effects of an individual's `financial capability'. Since 2010 the results of this research have informed Money Advice Service initiatives, under the direction of the FSA, to increase the financial capability of people negotiating significant life events. The research has also raised awareness among mental health providers and policy makers of the benefits that financial management skills have in building resilience and improving wellbeing. In particular, the Money Advice Service used the team's findings to develop an online service for people experiencing divorce/separation and a redundancy guide for people faced with job loss. The research also influenced the current government's policy objectives surrounding wellbeing and child poverty.
Research in the Centre for Competition and Regulatory Policy (CCRP) at City University London has influenced extensively UK competition policy and continues to do so. The research has influenced directly the Department for Business, Innovation and Skills (BIS) in the development of the new Enterprise and Regulatory Reform Act 2013 (ERR Act). A process of engagement including two Round Tables chaired by Professor John Cubbin and a corresponding documentary submission, shaped the way in which the ERR Act gives enhanced powers to a unified competition authority, the Competition and Markets Authority (CMA). The research impacted on the eventual form of this new institution, especially in its independence in merger and market inquiries between Phase 1 (Could there be a problem?) and Phase 2 (What do we do about it?), which were previously carried out by the Office of Fair Trading and the Competition Commission respectively. The Centre's input into the Act has also been central in influencing how the CMA will retain and enhance the role of members of the panel of independent "external" experts.
An AHRC and ESRC-funded Edinburgh research collaboration with the Argentinian Ministry of Science, Technology and Innovative Production (MOST), from 2007-2012, served as a key driver in the formation of regulatory structures, norms, knowledge and social understanding, helping to overcome state non-intervention in the regulation of regenerative medicine. As a direct result of engagement with the stakeholders in law/policy, medical and scientific communities, the research exposed a strong appetite for top-down legal intervention. This culminated in the first-ever model law presented by the MOST to the Argentine legislature (Congress) in 2013.
This case study refers to the work of Professor Thankom Arun of the Institute of Global Finance and Development (IGFD) at UCLan, who has been working very closely with Microfinance Institutions (MFIs) and international development agencies to understand and tackle the critical issue of finance in the development process. The ingenuity and originality of this type of research has had a profound impact on national and international policy debates, challenging and disproving misunderstandings about the inability of the poor to engage effectively with financial services provision, such as savings and insurance. The research has had a significant direct impact on the functioning of microfinance institutions at the local and grassroots level and on the delivery of financial services to some of the most vulnerable communities around the world.
Research on International Financial Reporting Standard 8 `Operating segments' (IFRS8), undertaken by academics in the University of Dundee's School of Business, has been used to frame the international debate concerning listed company reporting of disaggregated (segmental) information about business unit and geographic activities. Three bodies involved in regulation and compliance, have drawn on the research to inform their positions and strategies in relation to the standard. Firstly, the IASB's review of IFRS8 was informed by the research. Secondly, the key findings were fed into the Financial Reporting Council's proposals to amend IFRS8. Thirdly, the research underpinned the Institute of Chartered Accountants of Scotland's (ICAS) response to the IASB's request for information on how the standard was being applied, what challenges were encountered and associated costs.