The FCA has made it clear that the extension of the Senior Manager and Certification regime should be about culture change rather than ‘tickbox’ compliance. However, the level of detail and guidance around what this really looks like and how to achieve it is notably absent. Of course, this is because culture change is easy to say but far more difficult to achieve in reality. Few firms will know instinctively how to achieve culture change or may not even believe they need it.
In larger firms, it may not be clear whether SM&CR should sit with Compliance or HR or straddle the two with the risk that it is owned by neither. In smaller firms, it may all sit on the shoulders of one or the other because they don’t have the resource for both functions. This paper has been written to consider these challenges and offer some practical suggestions on how firms can address them and benefit in the process.
What do we actually mean by culture change and what culture are we moving from and to. Clearly, the main focus of the FCA mandated culture change around SM&CR is about increased responsibility and ownership around risk. One of the challenges with the extended regime is that some feel that the risk in Insurance and other Financial Services is not comparable with that of the Banks so there is less buy-in to the requirement for change. Of course, this is likely to increase the odds of people simply going through the motions in terms of Conduct and Certification. Should this view be challenged? Certainly, firms subject to the extended regime pose less of a risk to the economy should they get things wrong compared to Banks. But surely consciences should still be stirred if the risk of misplaced investment or insurance could cause more damage and pain to individuals than entities?
The FCA has provided increased incentive for change by shifting potential penalties for SM&CR breaches from the firm to the individual, but only a handful of Senior Leaders are acting as true trailblazers for behaviour change currently. Perhaps it is down to HR & Compliance to help Senior Managers realise the potential personal risks that could arise from not taking the regime seriously.
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