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Temple Risk Regulation

 

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June 2013

 

Keeping up with the Jones’s?

One of the great benefits of consultancy work is

 

having the opportunity to see how very different

 

firms in different sectors tackle the same regulatory

 

challenges.

 

Many of the solutions are transferable and firms

 

take their own spin on how to tailor approaches that

 

work for them. However, management practices

 

keep on moving and it’s arguable that once the

 

regulator has seen a particular solution well

 

executed in one firm it sets the bar higher for

 

others.

 

In a sense the regulator’s expectations are naturally

 

creeping up all the time and FCA’s deliberate

 

raising of the bar can only accelerate this.

Investing in People and

 

Methodology

The ideal business response is to have capable

 

well-motivated employees who continuously

 

develop their skills in an environment where the firm

 

also invests in suitable IT.

 

It all sounds simple but actually achieving that

 

harmonious situation is very difficult in practice.

 

If your peer firms have better CPD, Project and

 

Programme Capabilities, IT and support services

 

don’t be surprised if your FCA Supervision Team

 

finds your systems and controls less than

 

convincing.

 

There are also mindsets and cultural dispositions

 

that need to change too. Under FSA it would have

 

been common to position a firm’s regulatory efforts

 

to make an overall demonstration that there were

 

reasonable systems and controls in place. If you

 

like, with the firm and its Compliance team taking a

 

“tactical” approach to regulation investing in

 

“mitigation”, knowing that somewhere the firm would

 

fail. That looks like old fashioned thinking now as

 

FCA has made it very clear that generally “decent”

 

systems and controls are something of a “given”.

 

Post April 2013, there is an expectation that firms

 

will be able to show that the customer’s interest is at

 

the heart of the firm’s business model. Not easy.

Business Leaders need to really

 

know the Regulatory Landscape

With the establishment of a Three Lines of Defence

 

controls models now commonplace in firms, senior

 

management will be keenly aware of their

 

responsibilities and potential personal liabilities.

 

We would argue that management’s regular

 

business strategy meetings must-more than ever-be

 

supported by up-to-date and well informed

 

regulatory and risk thinking and awareness.

 

Especially in the retail sector with forthcoming

 

change s on platform payments, Solvency

 

changes, adviser charging still work-in-progress, the

 

mortgage market review and consumer credit

 

regulation to transfer to the FCA, there are multiple

 

and major challenges ahead.

 

Chief Risk Officers and Heads of Compliance have

 

challenging years ahead keeping their firms up-todate

 

and that ignores the ongoing attention required

 

by Governance and anti financial crime systems

 

and controls (including cyber security).

Conclusion

If you are to keep up with the regulatory and risk

 

Jones’s, the budget for risk and regulatory

 

resources must genuinely match the challenges

 

ahead.

Contact/Action to discuss this article or any

 

other FCA related matters confidentially please

 

contact

07794 612 430