Extending SM&CR to all Firms – how to tackle a ‘Super Wicked Problem’


Correctly identifying the nature of the challenge helps us to understand what we need to do and select appropriate strategies to succeed. In this article I will try to briefly explain what a ‘Super Wicked Problem’ is and some tactics for dealing with them.

A ‘Super Wicked Problem’ is a technical term used in the scientific and academic communities to describe a particular type of very complex problem.

Over 40 years ago, two scientists Rittel and Webber described the term ‘Wicked Problem’ in contrast to a ‘Tame Problem’, which was easily solvable.  

A ‘Wicked Problem’ describes a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognise. Moreover, because of complex interrelations, the effort to solve one aspect of a wicked problem may reveal or create other problems.

This concept was further developed by researchers such as Dr. Jeff Conklin, Director of the CogNexus Institute, who has consulted on the topic with the World Bank, United Nations, and NASA.  The following is a paraphrase of some of the characteristics of ‘Wicked Problems’ below:

  1. There is no definitive statement of the problem
    The problem is ill-structured and features an evolving set of interlocking issues and constraints
  2. Wicked problems have no ‘stopping rule’.
    The problem does not ‘end’ – it will always require continuous management and monitoring and adjustment to the ‘solution’ – it is never solved ‘definitively’
  3. Solutions to wicked problems are not right or wrong.
    Solutions are simply ‘better or worse’ – the determination of the quality of any potential solution is subjective
  4. Every solution to a wicked problem is a ‘one shot operation.’
    All attempts to tackle the problem, including ignoring it or taking ‘no action’ has consequences which impact on the problem, potentially revealing or creating new complexities

The distinction of a ‘Super’ Wicked Problem was made by a team of researchers at a scientific conference in 2007 and published in a research journal in 2012. They defined ‘Super’ Wicked Problems as also having the following key characteristics:

  1. Time is running out.
  2. No single central authority.
  3. Those seeking to solve the problem are also causing it.

The features that are common to a ‘wicked problem’ relate to the problem itself, but the characteristics that upgrade it to a ‘super wicked problem’ relate to the people (and organisations) trying to tackle it. Stakeholders have radically different perspectives and different frames of reference for understanding the problem.

most people would agree with the theory and applaud the intent but it cannot be denied that we are linking some very nebulous and subjective principles and concepts together and interlocking the most complex aspects of group and individual behaviour.

Why is extending SM&CR ‘Super Wicked’?

The Government, Treasury and the Regulators recognised major and significant issues with customer outcomes, successful operation of the markets and consumer trust, particularly in the Banking sector but also more widely across all financial services.

Various reviews and studies then looked at and found issues within firms and the ways firms interacted, identifying and blaming organisational Culture, Conduct and Professionalism shortcomings.

The introduction and subsequent extension of SM&CR is one of the major systemic changes being made, with the holistic intention of delivering material improvement across all of these complex areas.

Focusing on Culture, Conduct and Professionalism will (should?) deliver better consumer outcomes, restore trust etc.

I think most people would agree with the theory and applaud the intent but it cannot be denied that we are linking some very nebulous and subjective principles and concepts together and interlocking the most complex aspects of group and individual behaviour.

The extension of the SM&CR should demand a more consistent approach to behavioural standards across the financial services industry and help to reduce conduct risks. It should therefore help to effect a wider cultural change.

The regulators are creating a new Super Wicked Problem, and giving it to us to resolve!

What does SM&CR mean for Firms?

The current SM&CR for Banks and other deposit takers, came into force in March 2016 and introduced three new elements, described below. These three tiers will also be applied to all financial services firms under the new regime from 2018, but the actual details will be subject to the consultation process, which is expected to be published early 2017. It may even have started by the time you are reading this article.

  1. Senior Managers Regime (SMR)

    This will directly replace the Significant Influence Functions under APER and will apply to the most senior staff in the firm, (primarily, Board and Executive committee roles) performing Senior Management Functions (SMFs). For the Banks, the regulators were clear, SMR was intended to apply to fewer people than APER and to very clearly define exactly who was responsible for what, covering of all regulated activity of the firm – there can be no gaps.

  1. Certification regime

    This applies to a broader range of individuals; staff in roles identified by FCA or PRA as representing risk of ‘Significant Harm’ to the firm or its customers. These roles are known as ‘Significant Harm Functions’ (SHF), for example those giving investment advice. Firms will need to certify that a person is fit and proper, and competent, to perform a particular SHF at least annually. Critically, the onus of this assessment is all on the Firm and individually, the Senior Managers, within the Firm. Certified Staff will not be subject to regulatory approval (although they will be accountable to the regulators). Again, FCA has been clear that for Banking Firms, they expect the ‘Certified’ population to the bigger and include more roles than the current APER regime captures under the ‘Controlled Functions’ and they expect the annual F&P assessments to be more rigorous. Also, because Firms will now manage these staff, without regulatory pre-approval, the FCA Register for Certified Staff will disappear.

  1. Rules of Conduct

    These high level rules are similar to the existing Statements of Principles (although there are important differences) and apply to senior managers, Certified staff and importantly, all other employees in the Firm apart from a defined list of ancillary roles, i.e. cleaners. Under the new Conduct Rules, Firms have new obligations to investigate and keep records of suspected ‘breaches’ of the rules and to annually report (at least) to the regulators.

Another key aspect of the new SM&CR will be ‘Proportionality’. This will be a key part of the consultation process, and will be complex to resolve because of the scale of difference between firms that will now be subject. However, it is very clear from the ‘direction of travel’ that all firms can expect the majority of the current SM&CR features to apply to them, when the regime is extended.

Probably all Firms will have to produce and maintain some form of ‘Responsibility Map’ and individual ‘Statements of Responsibility’ for all Senior Managers, who will also be subject to the new ‘Duty of Responsibility’. Therefore, all Firms will have to review their current governance arrangements and document them and collate the necessary evidence that supports how and why their governance model is appropriate for their specific business.

The experience of many, possibly all, Banks was that this turned into a much more complex and challenging process than anticipated. It took longer and had significant implications for Senior Managers. Once they understood the details of what they were being asked to sign off, what they were personally and individually accountable for, in many organisations, it sparked some emotional debates about culture, conduct, authority and oversight. Particularly when, under SM&CR, Senior Managers proved to be in breach of their responsibilities could be subject to unlimited fines, remuneration claw back and lifetime bans.

How to tackle Super Wicked Problems?

The key to success is to remember the features and characteristics that make this into a Super Wicked Problem when developing plans and strategy.

  • Our Stakeholders will not have a consistent understanding of the issues or potential actions / solutions
    Engage early with your Senior Managers and get them involved. Interestingly, one of the most common pieces of feedback in the Banking world has been that some Senior Managers felt that SMR was “being done to them” instead of “being done by them”. Given their instrumental role, the potential implications for Senior Managers and the potential duration of the debate that will ensue, start the process of sharing SM&CR implications with them now.
  • The environment is constantly changing
    Other regulatory change is also coming that will compete for time and attention and resources and change what you need to do, while you are doing it. MIFID II, PRIPS and many more are also being introduced in the same timeframe – get familiar with these other changes and ensure that the people working on these projects are familiar with SM&CR.
  • Complexity interacting with Complexity
    Find tools / systems / solutions that will help to simplify and manage change.
    There are many firms (such as Redland) that offer solutions to help Firms to comply with the new obligations of SM&CR. Have a look at some of them, they may offer ways to help, not only with delivering the final solution but also with the iterative process required to get there. Also, many of the solutions available are much less expensive than you might expect. (brief shameless plug – Redland’s new InsightSMR OnDemand solution, is less expensive than Linkedin Premium and available for a totally free one month trial)
  • There is no single, right answer
    Don’t try to get everything perfect from the outset and don’t wait for ‘certainty’ before taking steps or making decisions. Do things that will help to reduce risk and simplify complex area of your business – it will help in the long run and reduce the effort downstream.
  • Our People are part of the problem and the solution
    Expect to communicate and collaborate, many departments and roles will be instrumental in addressing SM&CR  – HR, Legal, Compliance, Risk, L&D even good old T&C. If we can accommodate sharp differences in assumptions, knowledge and priorities it will be easier to make progress.

Key actions that can be taken right now include:

  • Engage with senior managers and secure priority and support
  • Identify stakeholders and form a working group
  • Prepare information packs that set out SM&CR objectives and implications
  • Review your existing governance arrangements and how they are documented

Collaboration, coordination and, where possible, simplification will be the key ingredients for success in ensuring that introducing SM&CR your Firms is successful. Success means delivering a compliant solution with the new obligations but also one that goes a long way towards raising standards and outcomes across the sector.

Perhaps, collectively, we can ‘tame’ our new ‘Super Wicked Problem’.


About Author

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Carl Redfern is the Compliance Director and co-founder of Redland Business Solutions, the market leader in specialist GRC Solutions for the Financial Services industry, for the past 15 years I have spent my time: • Working with Industry Forums, Professional Bodies and Regulators to help to assess the impact and define the requirements of developing regulation. • Designing solutions to support key strategic functions within Compliance, T&C, Conduct Risk, Governance and Operations. • Helping businesses to develop the business case for people, culture and conduct initiatives. Most recently, I have been extensively involved in the development of the SM&CR regimes, working with industry bodies, both regulators and many firms, assessing the implications of the rules and designing specialist solutions to enable efficient and effective implementation. Redland have been voted the Best Solutions Provider – Senior Managers Regime with our specially designed technology solution, Insight SMR, to help firms comply with SM&CR and holistically integrate Certification with wider Culture and Conduct programmes.

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