The Senior Managers Regime (SMR) came into force on March 7th 2016 and applies to banks, UK branches of foreign banks, building societies and credit unions, with the aim of increasing individual accountability so that confidence can be restored to the banking sector. Here, Adrian Dawson talks about its impact.
I recently held a breakfast seminar involving a number of individuals tasked with implementing and executing the regime from an HR perspective. Those that attended candidly discussed their experiences to date, including the debate about who is responsible, what are some of the potential outcomes, and what can businesses be doing now to ensure they limit their risk.
Whilst a dedicated date for full compliance to the regulations for 2018 is still yet to be announced, my delegates were all in agreement that there still seems to be uncertainty within organisations about who is responsible for executing the processes in adherence to the regime. Is it HR? Is it compliance? Or is it a combination of the two? What if the business outsources the requirement to a third party?
The web of governance between stakeholder functions is often complex and proves to be one of the biggest challenges, and the likes of a company secretary, will also have a vested interest in things like governance maps and board/non-executive director appointments. What is very clear is that best practice requires a strong and collaborative partnership between compliance, HR and the senior leadership team.
Under FCA guidance, criminal charges can be brought against senior managers working within financial services organisations that fail. Subsequently, top-down leadership needs to reinforce not only the significance of the regime, but also act as the key barometer for culture within the business given how significant this aspect is to the regime and its goals. Key stakeholders must own, contribute to and more importantly, understand the potential outcomes for non-compliance with the regulations.
Breaking it down even further, businesses must have the necessary building blocks in place sooner rather than later, including: roadmaps, clear guidelines and projects plans to ensure the relevant criteria continue to be met. This goes further than just ensuring compliance at the point in time the regulator assessed whether or not the processes are fit for purpose but also on an ongoing basis with regular checks being done annually, bi-annually or even quarterly. It is also important to consider how this is assessed, particularly for much larger organisations where a sample may be more viable than an SME where the entire population may be easily assessed and must apply from recruitment right through the employee lifecycle. It was suggested that an ongoing top-down review of key HR signature processes (reward/recruitment/learning/ER/ performance management) must be in play to ensure processes impacted by the regime have clear ownership and stakeholders have awareness of the regime as part of a wider roadmap of continual improvement.
The attendees at the seminar felt that it was highly likely there would be a test case, a major player who the regulators would focus on, and if it was proven that the organisation had neglected its responsibilities there would be far-reaching outcomes for both that individual and organisation, with reverberations across the financial services sector in the UK.
So what can businesses be doing now to ensure they are minimising the risk of becoming the test case?
- Have the strategic plan drawn up and ensure there are sufficient dedicated resources to follow through on the implementation.
- Obtain buy-in from the leadership team and encompass the entire organisation.
- Provide a clear plan of accountability post-implementation – passing the first assessment will not be enough.
Some companies are also suggesting periodic fire drill scenarios:
- what would we be able to provide; and
- how could we prove our SMCR controls if audited?
The reality is that meeting the requirements is not optional and if your organisation is affected by these changes, and you would like to discuss how we may be able to provide support to help you from an HR (or wider group) perspective, then please contact Adrian Dawson.
T: 0207 269 2392
Our contributors at the event included: