SMCR: just forms and box-ticking, right?

Well, actually, no. And we can see that this assumption is an almost guaranteed way to threaten your implementation of the new regime.

The spirit of SM&CR is that it’s a holistic rethink of the compliance culture in your firm. If you think about it as just a singular task you’re likely really going to miss things out.

You need to be sure SM&CR is embedded deep into your governance framework. Committing to it in the roots of how you work will encourage staff to commit to it too. And staff who really comprehend the reasons for the regulation will act appropriately, meaning you’re less likely to get left exposed to risks.

It’s no coincidence that SM&CR is all about cultural change when a priority for the FCA continues to be culture and governance. SM&CR is an extension of this particular fundamental focus.

The prospective impact of SM&CR is far-reaching. It’s a huge change that will require a lot of careful planning time and resource. It is estimated that it will take over 32 management days to implement SMCR, according to KPMG.

And even the absolute best laid plans face difficulties.

Although SM&CR is a replacement for the current Approved Persons Regime, it requires a completely different mindset and approach. It’s likely to demand a lot of changes to operational infrastructure, policies and processes. But such wide-reaching change can’t happen overnight. There’s no magic switch. It will require time to implement.

With just under 3 months to go, the clock is ticking, and your plans should already be in progress. Don’t be misled by the deadline of 9th December 2019, its the November 24th deadline that is more important and looming large: your SM&CR implementation project should factor in contingency time to make certain you’re fully prepared.

SM&CR involves departments throughout an organisation, not just compliance. So communication is key to guarantee you’ve considered all business functions, from the Board down.

So what can you do about this?

The most effective thing you can do is act right now. Take immediate steps to adapt your processes, and embed the new regime into your governance arrangements, systems and controls. Pay particular attention to your board and management structure.

Consider any potential conflicts of interest that may develop as a part of the embedding process.

Key Points are;

  • Give your organisation a ‘go live’ date that’s ahead of the implementation date.
  • Include contingency time to take into account unexpected delays or issues. The 80/20 rule works well.
  • Start now to uncover the unidentified issues and unforeseen consequences. Make sure that you allocate the right resources to make your SM&CR implementation a success.
  • Involve external consultants early on. We can provide guidance, advice and insight to help support your implementation project. We can also help you to see the bigger picture and spot challenges and weaknesses well ahead of the 24th November deadline. Time may be booked early by others and consultants may be unavailable later.

You may need to factor in additional time to consider these things:

  • HR processes; Potential changes to contracts, job profiles, training content, performance management framework, together with the possible tension between SM&CR and employment legislation.
  • Record keeping; Additional accurate and up-to-date records to evidence compliance with the new regime.
  • Governance; The impact on corporate governance arrangements, particularly for group and branch networks.
  • Regulatory references; Longer lead times as a part of the recruitment and selection process to allow for regulatory references to come through.
  • Annual certification process; The introduction and application of an effective certification process.
  • IT systems; The design or redesign of IT systems to help support SM&CR compliance.
  • It’s crucial that you fully understand the period of time and resource required to assist with your implementation project. There’s a very real chance of lost opportunity if you fail to build contingency into your plan; time that allows you to manage any barriers or delays in delivery.

The sooner you embed the new regime into your processes, the quicker you’ll have the capacity to identify weaknesses and issues. Then you can make the changes you really need to get on top of the new regulation asap.

We’ve made this sound really simple, but we know it’s not that easy.

Source: Compliance Consultant

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