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SM&CR robust firms have dealt better with C-19 crisis

15 June 2020

Firms that had successfully embedded the Senior Managers & Certification Regime were in a better position to respond quickly to the Covid-19 crisis, says Walker Crips CEO Sean Lam. 

In March 2016, the SMCR was introduced for banking organisations with a view to improving governance and accountability within the industry. In December 2019, the regime was extended to all FSA-regulated firms.

Lam says: “Covid-19 was the first litmus test of SM&CR and a very severe test it was. Did the statement of responsibilities clearly identify the person responsible for coordinating the company’s response to a crisis or did senior managers turn to their CEO for all decisions by default? When the FCA requested for key workers in financial services to be identified were firms able to comply promptly?”

Lam says those firms that had clearly listed their “other responsibilities” were able to respond more quickly to the fast-changing events over the past three months, as they had collectively identified the best individuals to take on those responsibilities in advance.

According to Lam, those firms were better prepared to deal with the redeployment of personnel, the move to remote working and the reallocation of resources such as staffing, computer hardware, cash and capital.

Lam explains: “It is clear that simply going through the motions of allocating senior management functions and prescribed responsibilities was not sufficient. SM&CR must be properly embedded into the culture of a firm in order for its benefits to be felt. Responsibilities must also be regularly reviewed, updated, and removed when no longer needed, in order to keep up with ongoing changes.”

While the allocation of responsibilities is important, Lam says transparency and sharing of that information is also crucial in enabling firms to adapt quickly.

Lam adds: “SM&CR must be taken seriously because firms that were unable to respond appropriately during this crisis, especially where clients were disadvantaged, may have to account for who was responsible, and how individuals discharged their responsibilities. We may see the ‘reasonable steps’ test being used to assess the actions of senior managers and responsible individuals in due course.”

Sean Lam is also CEO of EnOC Technologies.

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