Back in March 2016, the Financial Conduct Authority (FCA) introduced the Senior Management and Certification Regime (SMCR) for banking organisations with a view to increasing the integrity of those operating in the industry.
The idea was to hold individuals better to account, as key responsibilities were clearly outlined and monitored across the workforce.
In December 2019, the regime was extended to all FCA regulated firms, from insurers to claims management companies, as well as solo-regulated firms, writes Lucinda Carney, chief executive at performance management software firm Actus.
Many of these firms were truly challenged to introduce real cultural change in the way they work.
Compliance obligations which were previously dismissed as tick-box exercises in a business landscape focused on maximising financial gain now needed to be taken seriously if senior individuals were to avoid potentially huge personal ramifications.
Culture of compliance
SMCR was introduced to initiate culture change within the financial services industry, but the last four years seem to have introduced a minimal shift.
For any significant change to be seen, compliance needed to be embedded into existing processes such as performance management, bringing them all into the 21st century.
Yet, for an industry that is often seen to be at the cutting edge of technology and innovation, its approach to HR systems is worryingly old-school with many still relying on excel spreadsheets or paper.
So, with enforced home-working due to covid-19 thrust upon the City, what is the impact on SMCR compliance likely to be?
We have seen stock market volatility as traders and financial advisers are working individually from their kitchen tables without the subliminal benefits of a busy trading floor.
With people quite literally out of sight forced into working remotely, how confident can we be that accountability is being maintained and processes are followed?
Stuck in the Dark Ages
As the effects of the current pandemic are becoming more and more evident, the FCA and Prudential Regulation Authority (PRA) have announced guidelines on SMCR relief for some companies that may take longer than usual to submit any required certifications.
However, this doesn’t alleviate responsibilities completely, and with the likelihood that workplaces are going to have to maintain social distancing of some kind for the foreseeable future, surely now is the time for financial services to modernise?
Unfortunately, we know that many financial services organisations are still stuck in the dark-ages when it comes to people management, and having that on a remote footing, without visibility or auditability is only going to increase the risks.
Perhaps now is finally the time for financial services firms to embrace technology that can be used virtually to emphasise accountabilities and provide real-time visibility to those who require oversight, especially with more flexible regulations and HR softwares that can specifically manage SMCR compliance.
Overall technological evolution
Unlike paper, softwares provide real-time visibility of serving as a timely reminder to remote workers as to their responsibilities.
An integrated system can ensure that allocated responsibilities required by SMCR are accepted and evidenced, and that sufficient audit trails are created whilst also producing regulated statements of responsibilities. This data can be stored and managed on an ongoing basis to ensure that accountability is evidenced within the firm.
In normal times, the reduction of admin by leaving the spreadsheets and paper documents in the past where they belong would have been a main benefit, but perhaps not enough for such a traditional industry.
But now, covid-19 has forced change at pace. The financial services industry may be traditional but it is motivated to minimise risk.
Having a complete lack of visibility of their people in relation to fitness and propriety certification is a problem, as remote working continues to be enforced.
With increased fines and tighter regulations, the FCA introduced the motivation for financial services firms to bring about cultural change, but perhaps it has taken a novel virus to truly demonstrate what change can look like in this industry.
This article was written for International Adviser by Lucinda Carney, chief executive at performance management software firm Actus.
