How will the Senior Managers Regime affect compliance jobs?

How will the Senior Managers Regime affect compliance...Regulators implemented the Senior Managers Regime (SMR) last month, with the new rules expected to have a significant impact on the financial services industry in the years to come. Many organisations will now be familiar with the SMR, having provided statements of responsibility for all their senior managers to meet the guidelines.


However, companies will no doubt be wondering what effect these changes will have on their operations. One area of businesses that could see significant adjustments in the months and years to come is compliance.


These departments have already undergone overhauls across the financial services sector following the global economic crisis – and the SMR will bring further obligations for chief compliance officers (CCOs) and other C-suite executives.


Let’s take a closer look at the SMR and see how those in compliance roles could see their jobs change now the regulations are in place.

SMR focus and aims

The key objective of the SMR is to ensure senior managers are more accountable for failing to effectively prevent systemic risks. The SMR applies to dual-regulated firms, which are those that the Financial Conduct Authority and the Prudential Regulation Authority (PRA) both oversee.


Currently, the regime only covers banking sector organisations, including banks, building societies, PRA-regulated investment firms and credit unions. The scheme will extend to stockbrokers, asset managers, financial advisers, consumer credit businesses and a range of other financial services companies at some point in 2018.


The regimes aim to clarify the responsibilities of senior managers at organisations, meaning people in these roles can now be held personally liable for not taking reasonable steps to stop breaches. In other words, senior managers now have a statutory obligation to tackle risks that arise in their area of business.


However, companies will be pleased to hear that the burden of proof for these breaches has changed. The government had previously suggested that businesses would need to prove they had made adequate provisions to prevent problems from occurring in order to avoid punishment. The onus has since shifted to regulators to prove managers were negligent in their duties.

Added expectations for CCOs

Despite the changes in the burden of proof, compliance officers will still have a number of extra responsibilities added to their workloads following the SMR implementation.


Head of Deloitte’s EMEA Centre for Regulatory Strategy David Strachan said the cumulative effects of new regulations are having a notable impact on senior compliance managers.


“For CCOs, taking on a great deal more in their day-to-day roles has become the norm,” he explained last year.


“Until this point, many areas within the CCO’s remit fell into a ‘grey area’, but the new Senior Manager Regimes will require absolute clarity. This will minimise any scope for uncertainty or misunderstanding around the boundaries of the CCO’s responsibilities.”


A 2015 Deloitte report, ‘The Changing Role of Compliance’, said compliance officers would likely become more involved in shaping company culture. They will also want to make sure best practices are firmly embedded in areas of the business for which they are personally responsible.


Technology will play a larger part in the compliance function, as senior managers must deploy effective solutions that enable organisations to monitor and manage compliance risks. Specifically, data analytics will allow better decision-making among board members, including CCOs, by bringing greater insights into problem areas of businesses.

The search for talent

Deloitte’s research highlighted recruitment as a key challenge for financial services organisations as they try to meet new regulatory requirements. This trend was also recognised in the Barclay Simpson Compliance Market Report 2016.


The skills required of CCOs now go far beyond the traditional expectations of understanding existing regulations and how they apply to a business’ operations.


Compliance officers must also:


·      Address and reassess the compliance risks of legacy and new technologies, including cybersecurity issues

·      Show awareness of competition theory and how an organisation may attract competition intervention

·      Adjudicate in claw-back cases

·      Predict the compliance challenges a company faces when moving into new geographic or business areas


According to Deloitte, there is now a “war for compliance talent” as businesses fight for a limited pool of candidates who have the necessary skills, experience and technological understanding to meet new requirements.


Barclay Simpson’s 2016 Compliance Market Report revealed that the dearth of qualified applicants is exacerbated by the fact that many highly-skilled senior compliance officers are looking to work as contractors rather than take up permanent positions. This may be because the added responsibilities created under the SMR and SIMR can make full-time compliance roles seem less attractive.

What does the future hold for compliance officers?

Professionals with in-demand skills could find themselves in a strong bargaining position this year, particularly those with key technical capabilities. Some 62 per cent of businesses that Barclay Simpson polled identified challenges recruiting tech-savvy candidates.


Three-quarters of hiring managers reported issues finding the best compliance professionals in general. Furthermore, 45 per cent are hoping to secure candidates with more than five years’ industry experience and only 11 per cent claimed they wouldn’t be looking to add to their headcounts this year.


Ultimately, the SMR and the SIMR is likely to result in many organisations strengthening their compliance departments over the next 12 months and beyond. CCOs themselves will also look to boost their skills in order to avoid falling foul of new statutory obligations.


It’s difficult to predict the full impact the regimes will have on compliance roles, particularly until they are extended to all financial services firms in two years’ time. Nevertheless, the industry can expect the search for qualified senior compliance staff to get more competitive as regulatory requirements become more stringent.


Our Market Reports combine our review of the prevailing conditions in the compliance recruitment market with the results of our latest employer survey.




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