This has been a popular question on recent FCA visits. With the deadline for Accountability II expected in 2018, are you confident in your answer to this question? Mark Jones, Director at Unicorn Training, takes a look at how you can be.
So 2018 is here – foretold as the year of regulatory nightmares.
MiFID II will have already come into force by the time you were back at work in the New Year – that deadline was 3 January 2018 – while the cut off for the administrative behemoth that is GDPR looms large on 25 May 2018.
With no implementation date (at the time of going to print) as yet for the second tranche of Senior Managers Regime regulation, for solo-regulated firms and insurers, the temptation could be for it to fall to the bottom of the ‘to do’ list.
Don’t give in to it!
Lessons learned
We’ve been working closely with our partners FSTP, the multi-award winning financial services training and consultancy firm, on supporting firms with their strategy for Accountability 2, extending the Senior Managers and Certification Regime.
FSTP have a clear message – the FCA expects firms to have learned from those in the banking sector who went through this two years ago.
When SMR was implemented for the banking sector in 2016, some firms were far more prepared than others. Some almost left it too late, and getting their transition documentation in was a last minute effort, as what they thought was likely to be a pretty straightforward task turned out to be far more complex.
Whatever timetable for SMR implementation the Treasury sets, you can’t have started soon enough.
Aligning which Prescribed Responsibilities attached to which Senior Manager Functions, and who should take these depending on the business structure, was a particular source of debate and contention between Board Members and Senior Managers in firms too.
As FSTP attest, nothing is more persuasive than somebody who has gone through it saying ‘I can’t tell you how important it is to start early, this is what you’ve got to do, this is what caught us out, you think it looks straightforward on paper but…’
Rewind
We know the FCA introduced the SMR with the aim to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.
Encouraging a culture of staff at all levels taking personal responsibility for their actions, and making sure firms and staff clearly understand and can demonstrate where responsibility lies, are the core components of their ambition.
And ‘culture’ really is the key word here.
FSTP found firms going through the first tranche of SMCR took the opportunity to look at SMR compliance in the context of cultural transformation, with reviewing and refreshing its T&C practices a key element. Those facing Accountability II can do the same.
This isn’t a case of someone ticking a box on a form to say ‘I have kept myself up to date and am competent to do my role’, Senior Managers now have to sign it off.
Who would put their signature on that if they couldn’t prove what the individual was claiming was true? Especially with the FCA insisting lower redress payments and fines under the SMR are likely to outweigh the compliance costs of the reforms.
Breaking it down
So what are the questions you should be asking?
Here are just a few…how do you prove your people are competent to do their jobs? Are people being assessed against a set of standards and competencies? What are these? Do your Senior Managers understand what the core competencies are?
It’s not enough to say you have policies, procedures and processes in place, could you walk the regulator through them all? You want the regulator to be able to come into your firm and see who was responsible for what in each area of the business at any point in time, and then access all the information and evidence they need.
The desired outcome might be SMR compliance. But the by-product is firms are being encouraged to adopt much more common sense, transparent, people and performance management practices underpinned by a solid T&C foundation.
The requirement to define and allocate Senior Manager Functions, and generate Statements of Responsibilities, have made creating clear job descriptions and role profiles a must, as are effective workflow systems to log outcomes, evidence competencies and provide a platform for ongoing monitoring and reporting.
Then there is any additional training, learning and CPD that Senior Managers need to do to fulfill and maintain their Prescribed and other Responsibilities, to ultimately comply with the regulatory requirements of both the Senior Managers and Certification regimes.
Whatever timetable for SMR implementation the Treasury sets, you can’t have started soon enough.
Systemising your SMR policies and procedures removes the complexity of generating and maintaining offline files through access to an online audit and accountability trail, with automatic version control. Meanwhile, managing risk more effectively, by having clearly defined and approved responsibilities, brings assurance to Execs and NEDs on demand, whilst also providing firm wide SMR visibility and transparency.
Meanwhile, adopting an integrated approach to Accountability II means SMR and CR specific data can be incorporated into broader reporting and leveraged as allocation criteria for relevant learning and assessment activities.
This is why the Unicorn SMR Tool is helping firms get ahead with SMR compliance as part of an integrated platform that also features a T&C and workflow system, CPD tracking and reporting, a comprehensive GRC eLearning suite and a Certification Regime system, to deliver ongoing Accountability 1 and 2 support.
With much of this SMR implementation work being undertaken alongside ‘business as usual’, people and budgets are being stretched so the time and resource saving benefits can’t be underestimated either. Your firm’s Responsibilities Map and Individual Statement of Responsibilities can be easily planned, built and maintained via a secure, intuitive interface, directly from your desktop or mobile device.
SMR mapping can also be combined with T&C to go beyond simply the tracking of Functions and Responsibilities. Duplication of effort in creating and managing organisation hierarchies and reporting lines across multiple systems is also removed.
In a year of regulatory nightmares, you can avoid losing sleep over the second onslaught of SMCR.
