The SMCR is a complex regulation that's only going to get more complex. Automation is the key to making sure you stay in complete compliance over the long haul. Ruairi Nash, Star's resident expert on the SMCR and Star's Individual Accountability Regime software, explains how the process works
Designed to mitigate the uncertainties surrounding individual responsibilities within regulated financial firms in the UK—and ensure the right people are held accountable if and when things go wrong—the compliance requirements of the Senior Managers and Certification Regime have placed significant demands on firms on many fronts. And while senior management may ultimately be responsible for its own integration and coordination, when it comes to the SMCR compliance has an equally important role to play. Identifying certification needs, guaranteeing risk-information accuracy, and evidencing senior management’s ongoing adherence to this expansive set of requirements are just a few of compliance's many related responsibilities.
With such high stakes, and so much information to keep track of, it’s clear that FCA-regulated institutions must adopt a long-term, holistic approach to managing the SMCR. Adding even greater urgency to such initiatives are the increased scope of scrutiny and larger potential fines related to the regulation that are currently in motion. It's no wonder that in 2020, more than two-thirds of UK firms expected to increase the money and resources spent on conduct risk. Together, these factors contribute to an immediate need for more sustainable, efficient, and effective frameworks and methodologies for managing SMCR-compliance obligations.
The upshot of all this? Manual processes will no longer suffice for reliable SMCR-compliance monitoring: being neither robust enough nor sufficiently auditable enough to guarantee regulatory compliance. It's time for UK firms to embrace regtech solutions, which will help embed accountability frameworks in firm culture and provide the operational agility necessary for the continually evolving scope of the SMCR.
INDIVIDUAL ACCOUNTABILITY REGIME SOFTWARE
When software automates processes, monitors and records firm activities, and escalates potentially risky activity to the right person, SMCR-related administrative tasks become less time-intensive. Regtech solutions also help organizations integrate and share conduct-related data, such as regulatory notices or staff certifications. From a process efficiency perspective, compliance teams can spend more time focusing on core business activities rather than day-to-day regulatory compliance procedures.
With a dedicated SMCR regtech solution, firms can demonstrate proper, auditable workflows to the FCA. Such practices can ensure the right level of competence for certified roles: lessening the risk of regulatory intervention, reputational damage, and potential fines. Here are four specific ways Star’s Individual Accountability Regime solution (IAR) can take a burdensome weight off of compliance teams' shoulders when it comes to managing the requirements of the SMCR while simultaneously reducing regulatory risk for firms:
1. DOCUMENTATION INTEGRITY
Regulations require that certain firms (including banks, building societies, dual-regulated insurers, and enhanced solo-regulated firms) create a management responsibilities map, documenting the responsibilities, functions, and governance arrangements of senior managers. Current practices tend to involve spreadsheets or word documents for map creation, but these options can be edited easily, bringing documentation integrity into question. Star's IAR regtech solution, on the other hand, creates indelible records, detailing in-depth a firm’s structure at any point in time. Senior managers sign-off on read-only versions of the records, creating an indisputable audit history that is easily retrievable with the software's mapping tool.
2. SCALABLE CERTIFICATION
Managing the annual certifications of a large staff is time-consuming and labor-intensive for compliance teams. But with IAR, firms can automate and scale the process with ease. No longer do compliance teams have to manually chase down individuals to complete the required mandatory certification activities. With IAR, dashboard reporting highlights areas of the business which maybe experiencing hang-ups and delays in the process, so compliance teams know exactly where and when to look for potential issues. By default, IAR serves as a compliance conscience, and facilitates and encourages completion of critical activity.
3. EMPLOYEE COMPETENCE
Rather than relying on one standard to confirm employee competence, IAR can collate the professional qualifications, statements of professional standing, mandatory training, and other data points to evidence that each individual is fit and proper and competent to perform his or her role. Firms can easily view all related information about employees prior to certifying them. And with all activity feeds stored in the same place, no one within or outside the firm has room for assumptions. The information is easily reviewable and accessible.
4. CREATING A TRUE PICTURE
Within IAR, firms can store all the necessary employee data to manage and monitor regulatory authorizations and directory person information. Should someone make a change in the platform, the system will notify the central team for regulatory compliance review and subsequent submission to regulators. The mapping tool, again, allows for an audit history of changes to individual employees’ status, making it easier to meet regulatory deadlines.
With the SMCR, compliance professionals face an increasing number of challenges from both a practical and administrative standpoint. And manual processes or piecemeal solutions no longer cut it. As such, firms need go-to regtech software they can trust. But it’s about more than just ticking the box, and making sure the day-to-day work of SMCR management gets done. The automation and resultant optimization that regtech software bring can move a firm from being reactive to proactive, and potentially preemptive, while also allowing compliance officers to focus on the higher-value work they do best—all towards keeping firms operating profitably and in line with regulatory requirements. A software solution like IAR is an enabler, then, in the best sense of the word.