Andrew Pullman and Michele MacKinnon of People Risk Solutions shared their top tips and techniques for complying with the SMCR in a recent Ciphr webinar
How would you rate your compliance so far with the Senior Management and Certification Regime (SMCR)? If the honest answer is that you’re not getting on that great, then you aren’t alone. In our recent January webinar, held in partnership with People Risk Solutions, 18% of attendees said they aren’t getting on that great. A further third (32%) said their HR teams were not yet involved with the SMCR rollout.
Given that the extended regulations came into force in December 2019, and that they affect every aspect of the employee lifecycle – from hiring to appraisals and offboarding – HR’s lack of involvement with SMCR compliance so far is a worrying trend.
Here are Pullman and MacKinnon’s top five tips and techniques for successfully applying the SMCR and creating a culture of transparency, clarity and responsibility.
1. Familiarise yourself with the conduct rules
As part of the SMCR, staff in financial services first are required to comply with the FCA’s five conduct rules:
- You must act with integrity
- You must act with due skill, care and diligence
- You must be open with the FCA, the PRA and other regulators
- You must pay due regard to the interests of customers and treat them fairly
- You must observe proper standards of market conduct
Although the rules seem fairly straightforward, Pullman said “it’s the interpretation of these rules and the proper application of it that’s really important.” Employees need to have a clear understanding of the conduct rules so that they can be held individually accountable for their actions and behaviours.
He added: “ starts with senior managers, who are personally accountable for the businesses that they run and that then flows down the organisation and individuals are accountable for what they do.”
2. Work closely with compliance teams
The SMCR’s requirements affect every stage of the employee lifecycle, so it’s logical that HR be closely involved with its implementation and ongoing compliance. But only a third (36%) of webinar attendees said that their HR teams were key players in rolling out the SMCR in their companies.
Commenting on the results, Pullman said: “I’m still astonished to find organisations where HR and compliance still don’t talk to each other because there is a huge overlap and I think if they aren’t doing it, they should be working very closely with compliance. There needs to be a “silver chain of accountability right from the top of the organisation down to the receptionist.”
3. Make sure that people are certified every year
Under the SMCR, firms are now responsible for making sure that people are certified every year: a task that Pullman identified as being one of HR’s biggest challenges because certification is a wholly HR-driven process.
As a minimum, you have to make sure people are certified once a year as being fit, proper and competent. But Pullman recommended that firms certify or recertify individuals “every time a certified person is hired, every time they get promoted, and every time they change jobs they have to be recertified.”
And you might be surprised at the high volume of individuals that need annual certification. One of Pullman’s clients had 10 senior managers but only three certified employees – a “minimalistic approach put all the responsibility on the senior managers. I think they will be reviewing that because certainly our experience is that there are now more people taking material risks in organisations.”
4. Play a key role in the implementation of SMCR
While senior managers might believe they have plenty of time to comply with the SMCR before December 2020, Pullman cautioned that “the later you leave it, the more intense the whole process will be later in the year” – especially if you need to purchase and implement specialist software to assist your compliance (see point five).
If your company isn’t focused on SMCR compliance, step up as an HR professional and take the initiative: arrange meetings with senior stakeholders, outline the regulations’ impact and the scale of work ahead, and quantify the financial and reputational risks of non-compliance.
5. Ensure the correct technology is in place
Nearly half (42%) of webinar attendees said they had no technology in place to help support SMCR compliance. But the high volume of administration involved, and the FCA’s requirements for firms to have full and robust histories of actions taken, mean that relying on paper files or spreadsheets isn’t feasible.
“Can you imagine giving a senior manager a load of Excel spreadsheets, and asking them to analyse them and make a decision?” asked MacKinnon. “We need to be more sophisticated than that.”
Many firms are turning to specialist software – including HR systems – to help them manage high admin volumes, automate processes, and store proof of compliance at every stage of the employee lifecycle.
Ciphr’s cloud-based people management solution is here to help you comply with the SMCR’s requirements – providing you with comprehensive tools to help you simplify and automate processes, mitigate risk, record and report on compliance, and establish and maintain robust SMCR employee records. Find out more here.
Want to learn more about the tips and techniques for SMCR compliance? Watch the on-demand webinar now