Finance Monthly May 2019 Edition

SENIOR MANAGERS & CERTIFICATION REGIME (SM&CR) – THE JOURNEY IS JUST BEGINNING THOUGHTS FROM ONE OF THE UK’S LEADING EXPERTS ON IMPLEMENTING SM&CR – JULIE PARDY Finance Monthly hears from Julie Pardy, Director of Regulation and Market Engagement at Worksmart, who reflects on the whirlwind few years that the team’s had and discusses the top five challenges firms can expect when implementing and managing the Senior Managers &Certification Regime (SM&CR) - a programme designed by the FCA to improve ‘trust in financial services’ by making the right people in financial services firms accountable for their decision. ittle did we know that when SM&CR was just a glimmer of an idea at HM Treasury, it would have such an impact on the industry and, in doing so, it would change Worksmart so substantially. Borne out of the ‘Changing Banking for Good’ review led by MP Andrew Tyrie back in 2013, the idea of greater Individual Accountability and Conduct Standards for all landed in the form of the SM&CR in March 2016 for banks, building societies, credit unions and the largest designated investment firms. Led by the PRA and the FCA, the regulation has had and continues to have, a major impact on these firms in a way foreseen by only a few a number of years ago. I recall my conversations with banks during this time when many firms saw the incoming regulation as a relatively minor additional piece of reporting required by the regulators; how wrong they were. Unlike most people, the Worksmart team had a rather different take on the incoming regulation. With the overlay of additional corporate governance requirements that SM&CR brings alongside the requirements to manage, maintain and update a Management Responsibilities Map (MRM) and associated Statements of Responsibilities (SORs), the technologists amongst us knew what’s coming. The in-house view was that the new regime needed to be supported and underpinned by technology that not only helped firms meet their regulatory responsibilities but also offered genuine business process improvement capability. As a result, we invested heavily in every area of our business, from re-platforming our SM&CR solution and moving to a SaaS model, to growing our regulatory consulting capability. We also worked hard to deepen our relationships with the trade bodies that support the affected sectors of the market place. In what seems like the blink of an eye, we became the SM&CR supplier of choice for the then British Banking Association (now UK Finance). In turn, this led us to become the ‘leading supplier of SM&CR solutions’ in the UK. And from there it was a very short, but very proud, step to winning a clutch of ACQ5 Global awards in 2018 for our work in the industry. All very nice you might say, but how does that help me? Using our experience gained over the last four years, this article highlights the top five challenges you can expect to face as you implement and then manage the regime in BAU. With more SM&CR implementations within the affected markets under our belt than we can now even remember, we’re confident that we’ve encountered most of the challenges the new regime presents. Challenge 1: Sorting out the Senior Manager Regime (SMR) won’t be as easy as you initially think. The regulation requires firms to identify which Senior Manager Functions (SMFs) and Prescribed Responsibilities apply to their firm. To help, the regulators provide a list of the SMFs for each type of firm under the new regulation, i.e. Enhanced, Core or Limited, and Prescribed Responsibilities for Enhanced and Core firms. Sounds straightforward and, indeed, for the most part, it is. However, beyond the standard Control Functions such as SMF1 (CEO) and SMF3 (Executive Director) and the Required Functions – SMF16 (Compliance Oversight) and SMF17 L 13 www.finance-monthly.com ASK THE EXPERT - SM&CR