Why Is It Important to Diversify the Financial Sector With Women?
by Sherry Hao, Controller, U.S. Money Reserve
It goes well beyond just ticking a “diversity” box.
Over the last few years, the world has been in turmoil and upheaval. The advent of the novel coronavirus, the massive social justice movement, a deeply divisive U.S. presidential election, and now the potential for a world war have all contributed to a sense of uncertainty in business. The financial sector has been roiled again and again by a wide variety of global events and shifts that continue to rattle the foundations of our global economy, and all of this poses a real challenge. In the midst of so much change, how can we find some stability? Now, more than ever, it’s crucial to diversify the financial sector with women. Here’s why.
Having More Women in Finance Means More Stability for the Global Financial System.
Including women in finance is vital to any company’s financial stability. According to a 2018 story by the World Economic Forum, including women throughout the financial system — from both the customer side (depositors and borrowers) and the firm side (at higher levels of leadership within a financial firm) — makes the banking industry as a whole more stable. Interestingly, banks with more women on their boards tend to have greater resistance to stress, higher capital buffers, and a lower proportion of nonperforming loans, according to the report.
That means increasing female representation in the financial sector yields more stability for a bank, which can mean better returns for both investors and employees and more stability in the global finance sector.
Oliver Wyman, a consulting firm, released a report on women in financial services in 2020. The report argues that being accountable to the workforce is not the only key to improving collective financial stability in the post-pandemic world. As the report notes, “There is at least a $700 billion revenue opportunity from better serving women as customers. Supervisors and shareholders are increasingly applying pressure on firms to embed stability and drive better returns through diversity and inclusion. And both individual firms and the industry as a whole have a responsibility and opportunity to improve gender equality in society more broadly.”
Having More Women in Finance Yields Improved Critical Decision Making.
It goes without saying that having more diverse teams improves critical thinking — and an increasing body of research bears this out. With more voices at the table, more opinions, and more backgrounds, companies, both large and small, can make better decisions about the future of their work. People from all sexual orientations, identities, backgrounds, and cultures can offer unique perspectives on ideas and solve problems differently by simply applying their varied experience. Without diversity in our boardrooms and our financial halls, we risk becoming completely out of touch with what the world wants, needs, and can create.
By including more women in your financial workplace, you can increase the odds of making better business decisions because you’ll be including at least half of your customer base when making your business decisions. Without women in positions where their voices and opinions are heard, you isolate or, even worse, completely ignore half of your client base. That in and of itself is terrible business and should be avoided if you want to be successful.
Having More Women in Finance Offers a Competitive Edge in Valuable Soft Skills.
As the world wakes up to the value of diversity, it’s essential to recognize the valuable skill sets women bring to the table. In many cases, women have soft skills or emotional intelligence that can help companies land a deal, smooth over rough patches, and even anticipate shifts in customer behavior. These skills are incredibly valuable for an organization — especially a financial one, since money is ultimately about relationships.
Of course, technical skills, experience, and knowledge are fundamental to success, but organizations need to start holding soft skills in much higher regard. According to the Department of Labor, soft skills are “even more important to work readiness.”
Women tend to hold a key advantage when it comes to soft skills. A study by global consulting firm Hay Group found that women outperform men in 11 of 12 key emotional intelligence competencies. According to a story over at Inc., one of the study authors said in an interview, “If more men acted like women in employing their emotional and social competencies, they would be substantially and distinctly more effective in their work.”
Having More Women in Finance Can Yield Better Investments.
In general, women tend to be more risk-aware and, in some cases, risk-averse. This can be a double-edged sword when it comes to the financial business sector. If the women you hire are more risk-aware, then integrating women into your financial workforce could lead to better-performing investments.
A few studies have shown that there may be a correlation between increased gender diversity, especially at the very top of your financial company, and improved investment outcomes. A 2018 study out of Warwick Business School in England shows that women investors outperform men by 1.8 percent. The study looked at 2,800 investors in the FTSE 100 and found that while men got returns of around 0.14 percent better than the FTSE, female investors got a return of 1.9 percent over the FTSE. The study shows that it is really more about what women invest in rather than how frequently they trade (women in the study traded an average of nine times per year, while men studied traded an average of thirteen times per year).
Having More Women in Finance Means Happier Employees.
Bringing more diverse voices to any table will inevitably bring new approaches and new thought leadership to a business. This is no different in financial services and is one more reason that female representation in finance is so crucial.
Diverse companies are more creative, according to CNBC. Additionally, the Peterson Institute for International Economics study shows that having women in the c-suite increases net profit margins by as much as one percent. Diversity of ideas and voices is important for business success, particularly in the new post-pandemic world.
Additionally, bringing more women into the financial boardroom raises engagement across a firm. A recent Korn Ferry report shows that having women in the executive suites in financial firms boosts employee engagement more than having all-male boards.
The Bottom Line: It’s Vital to Diversify the Financial Sector With Women.
While it should go without saying, it’s clearly high time for the financial sector to diversify its workforce with more women, and that means including them in all echelons of a business. Women offer incredible value to both the global stability of the financial markets and to the future of businesses, both large and small. Excluding women from the financial sector is a perilous path to take — there are so many pros to including females in every financial sector, from the front of the house to the boardroom. By continuing to push ahead with equality, diversity, and representation, business leaders have the opportunity to effect real change. Including women not only makes good business sense but also makes global financial sense.