The Background of SMCR

Back in March 2016, the 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 that individuals would be held to account as responsibilities are clearly outlined and monitored across the workforce. The SMCR regime, therefore, affects more than just the Compliance department, but the firm as a whole.

From December 2019, the regime extends to all FCA regulated firms. This ranges a variety of firms from insurers to claims management companies, as well as solo-regulated firms. Many of these firms were truly challenged to introduce real cultural change in the way they work. Compliance obligations that were previously dismissed as tick-box exercises in a business landscape that was focused on maximising financial gain now needed to be taken seriously due to SMCR. Especially as senior individuals can face potentially huge personal ramifications such as hefty fines from the FCA.

The culture of compliance

The FCA brought about SMCR to initiate culture change within the financial industry. However, the last four years seem to have introduced a minimal shift in the industry. For any significant change to occur, there needs to be a seamless integration of compliance and people management practices, bringing both processes into the 21st century. Yet for an industry that is often seen to be at the cutting edge of technology and innovation, its HR approach is worryingly old-school with many still relying on excel spreadsheets or paper.

So, with enforced homeworking due to Covid-19 thrust upon the City, what is the impact on SMCR compliance likely to be? We’ve seen stock market volatility as traders are working individually without the subliminal benefits of a busy trading floor. With people quite literally out of sight, how confident are you that the culture of accountability is being upheld? In particular, are key SMCR processes still working as they should?

With increasing pressure to have clear processes that ensure accountability and responsibility, many financial services organisations are still stuck in the dark ages when it comes to people management. Putting manual processes on a remote footing is only going to increase these risks.

Compliance from an integrated HR and Compliance point of view

Perhaps now is finally the time for financial services firms to embrace technology that can emphasise accountabilities virtually and provide real-time visibility to those who require oversight. HR software that can specifically manage SMCR compliance ensures that the two ingredients of cultural change are logically intertwined from start to finish. Unlike paper, it provides 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. In addition, it can provide sufficient audit trails 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 in the past would have been a main benefit. However, even this was perhaps not enough to convince key stakeholders for such a traditional industry.

The current lockdown will highlight key issues with manual processes

Covid-19 has forced change at pace, and Financial Services may be traditional but they are motivated to minimise risk. Hopefully, firms will realise that having a complete lack of visibility of their people in relation to fitness and propriety certification is a key problem. Especially as remote working continues to be a part of our business lives for at least the next few weeks.

With increased fines and tighter regulations, the FCA introduced the motivation for financial services firms to introduce cultural change. And yet, some still chose to go with manual methods. Perhaps it has taken a novel virus to truly demonstrate what change can look like and what change is necessary for this industry.

It is now down to compliance and HR to pick up the mantle and be the trailblazers for culture change. Through appropriate technology, they can provide the certainty that the requirements of SMCR are being honoured in the long-term.

Additional Resources

For more information about this topic, you can find additional resources using the buttons below. At Actus, we offer more than free HR and Compliance resources and great performance management and compliance software! We also have a team of organisational development consultants to help you meet your performance management requirements for culture change. In addition, if you would like to find out more about this service, why not get in touch by contacting us here.

Blog: Do your SMCR processes protect you as an individual?

White Paper: How can SM&CR drive real Culture Change?

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