Board Member Event - deloitte.com · • Refine role profiles and job descriptions, if required, to...
Transcript of Board Member Event - deloitte.com · • Refine role profiles and job descriptions, if required, to...
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Board Member EventSenior executive accountability regimeMay 2019
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Agenda
Welcome
Topic Presenter(s) Timing
Introduction Colm McDonnell 3.00-3.10pm
Keynote
Senior Executive Accountability Regime Proposal and General Expectations
Derville Rowland, CBI 3.10-3.30pm
Session 1: Being Prepared –Elements to Consider
Sean Smith 3.30-4.00pm
Break – 5 mins
Session 2: Practical Steps to Consider
James Beasley 4.05-4.35pm
Session 3: Regulatory Briefing -Market Insights and Areas of Focus
Bronagh Shiel 4.35pm-4.50pm
Final questions & close Colm McDonnell 4.55-5.00pm
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Introduction
Colm McDonnell
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The Senior Executive Accountability Regime: Our Expectations and Insights for Boards
Derville Rowland
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Session 1
Being Prepared – Elements to Consider- Practical Steps to Consider - Roundtable Discussion- Feedback on Discussion
Sean SmithPartner – Risk Advisory
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Practical considerations before implementation
Start early
Senior
Management
Support and Clear
Ownership
• Give the topic sufficient time for discussion and debate and find an approach that works best for your firm – avoid unintended consequences. Demonstrate that you are embracing today and future obligations in a meaningful and purposeful way.
• Tone from the Top and leadership buy-in – culture of ownership and accountability
• Consider who will lead and own the implementation and embedding – Board, compliance, HR….all?
• Get the right team in place and establish a defined project management model to breakdown each step and clearly assign ownership – Program vis-à-vis BAU. Methodologies should be considered in depth before application e.g. mapping methodology
Getting started
• Build on current expectations including Fitness & Probity - consider the practical implications of enhancing current requirements and consider future changes
• Calibration – how deep and wide should you go? Should you benchmark?
• Identify the opportunities, not just a compliance exercise e.g. can be used to drive performance
• Review a sample of previous incidents to understand the challenges of the practical application of the regime
Awareness and
Training
• A strong communication plan to assist in establishing a solid dialogue between senior management, the proposed certified population and the wider firm to ensure greater engagement
• Ongoing awareness and understanding of how this could impact individuals including assurance on the level of compliance and the expectations on what this means
• Strong MI is key, should this be at individual level or should it be collective?
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Practical considerations before implementation
Start early
Outsourcing
• If senior management responsibilities are outsourced and how is this managed - documented roles, responsibilities,
objectives and regularly assessment of performance
• Appoint a senior person with responsibility for the outsourced role i.e. a direct reporting line for the delegate, preferably
independent from the functional reporting line
• Consider approach to matrix reporting lines and SEAR
Strategic
Approach
• Fully understand how much work could be involved when it comes to implementation and ongoing embedding – agree what
is required upfront to avoid rework and unforeseen issues
• Ensure that your governance arrangements are fit for purpose and appropriate for your firms scale and complexity –
consider impacts on the committee structure, reporting lines and performance management
• Consider how to identify areas of responsibility and accountability across the firm – top up vis-à-vis bottom down approach,
individual vis-à-vis collective. Compliance universe vs thematic approach.
• Consider who is in scope and who is not. Err on the side of caution
• Strategic consideration of linkage to your strategy, business model, risk frameworks, culture program and broader culture
initiatives e.g. speak up
• Engage with individuals potentially within scope early and obtain their acknowledgement/acceptance – clear SOR
Succession
Planning
• Refine role profiles and job descriptions, if required, to ensure that they accurately reflect the responsibilities, reporting lines and delegated authorities etc.
• Process to identify and develop potential successors for key responsibilities and accountabilities through systematic evaluation and training - increase the availability of experienced and capable staff that are prepared to assume these roles as and if they become available
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Practical considerations before implementation
Start early
Benefits of ‘getting accountability right’
• Key opportunities to improve your organisation’s governance, risk and culture – more transparency and accountability can improve decision
making
• Greater ability to demonstrate ongoing compliance with Fitness & Probity and Corporate Governance Code applicable for your firm
• Enables better tracking of responsibilities against performance and alignment to your firm’s strategy and objectives
• Supports setting expectations around culture, behaviour, performance and the role that each individual plays
• There is already the expectation to be demonstrating good governance and driving individual accountability – focusing on this area will
facilitate you in meeting regulatory expectations
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Questions to consider
Are you prepared to manage the potential changes and increasing regulatory requirements?
How will you ensure buy-in across your firm at all levels and across the 3 lines of defence?
How will this impact other key initiatives that are ongoing within your firm or on the horizon?
How will you gain confidence that management information is providing the necessary level of detail and insights to demonstrate that your firm is taking reasonable steps to identify, assess, measure and reporting on accountability?
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Session 2
Practical Steps to Consider- Overview of lessons learned from UK SMCR implementation- Roundtable Discussion- Feedback on Discussion
James BeasleyDirector – Deloitte UK
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SMCR Application
Banking and Insurance post-implementation review findings
• Firms underestimate the certification regime at
their peril;
• Evidencing “reasonable steps” needs to be practical
and sustainable;
• Tightening up board disciplines in light of SMCR;
• Focus on group and subsidiary relationships and
management of conflicts of interest from the
regulators;
• Firms taking greater care over the approach to
strategic prioritisation;
• Execution risk and the approach to material
transformation programmes;
• Regulators’ continued focus on culture;
• New SMF responsibilities for regulatory hot topics.
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Implementation
Delivering the programme – lessons learned
Appropriate sequencing of workstreams
Programme Ownership
Documenting rationale
Regulatory interaction
Cross-Functional Involvement
A considerable number of firms spent a lot of initial time on the Senior Managers aspects of the programme, only to find that changes needed for “fit and proper and conduct monitoring” processes have a longer than expected implementation time.
Some firms experienced significant debate over which individual should lead the SMR project. Smaller firms often nominated the CEO as sponsor, in line with expectation for this individual to be accountable for regime on BAU basis.
Once timings on the new regime are clearer, those firms with a supervisor may want to plan the timing of an initial regulatory interaction as well as grandfathering timescales.
Board involvement
Once timings on the new regime are clearer, those firms with a supervisor may want to plan the timing of an initial regulatory interaction as well as grandfathering timescales.
There can be significant discussion over key areas such as allocation of responsibilities. The regulations require a firm “to keep a record of its reasoning” so clear design documentation is important.
Working groups typically need good coordination across Compliance, Legal, CoSec, HR and in some cases COO and IT.
Programme considerations
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Reasonable Steps
NED considerations & debate points in other firms
Outsourcing –
intragroup and
external third party
Reporting and
assurance on the
regime
Conflation of individual
versus committee
responsibilities
Remuneration
interactions between
Group and subsidiariesAction-taking to
help shape MI
On-going discussion on
depth and quality of
challenge.
Material change /
technology
programmes
Taking on a new SMF role
or area of responsibility
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Questions to consider
How will responsibility for ongoing compliance with the regime be apportioned? What might change in order to be successful?
How might you and your firm approach documenting and evidencing reasonable steps?
What impact might the regime have on board disciplines? i.e.
• Minutes and the degree of attribution
• NED appraisals
• Skills Matrices
• Board induction and training
• Board and executive succession planning
What other tools might NEDs use to demonstrate reasonable steps?
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Session 3
Regulatory Briefing - Market Insights and Areas of Focus
Bronagh Shiel Senior Manager – Risk Advisory
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Regulatory Briefing
Governance and Culture
To address the root causes of misconduct there is an intensified regulatory oversight of firms’ governance and
risk & control management frameworks.
Increased focus on diversity and inclusion at
board/senior management level, especially as a way of avoiding group-think
and ensuring effective challenge.
Access and Vulnerable Customers
Concern about financial exclusion, particularly as a result of growing digital distribution, means that regulators continue to
scrutinise the levels of access that more
“vulnerable” groups have to financial
services and products.
Regulators are also focusing on firms’
policies and practices to ensure that
vulnerable consumers are not put at risk by
poor firm conduct.
Scrutiny of Business Model to the Changing Risk
Environment
As a decade of accommodating
monetary policy comes to an end, political
uncertainty increases, and technological
innovation disrupts and transforms the way
financial services are delivered, regulators are
stepping up their scrutiny of how firms
are responding to these risks.
Protection and Use of Data
With greater use of consumers’ personal data it is important to
prevent another possible “Cambridge Analytical
moment” given the harm it could do to consumers’ trust.
With GDPR and PSD2 in place, regulators have both the basis and the tools to take a closer look at firms’ use of
data.
2019 financial services – some constants
Testing for Cyber Vulnerabilities
As technological change and the rise of digital
business models continue, cyber-
related risks have risen up the regulatory
agenda, and means heightened scrutiny of
firms’ cyber resilience.
Model Risk Management
to Senior management
and boards to improve their understanding of the strengths and
weaknesses of internal models that are used for regulatory
capital, strategic decision making and other areas; as well as their governance and
oversight of such models.
Banking Sector Themes Capital Markets Sector Themes
Prudential Resolvability ILAAP,ICAAP,SREP & Stress
Testing
Financial Crime Landscape Algorithmic & Electronic Trading
Payment for Research
Transaction Reporting
Traded Risk
MarginClearing & Settlement
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Regulatory Briefing
Shift from implementing new regulation to ongoing
supervision
A shift away from regulatory reform and policy initiatives, with regulators
and looking to assess how new regulatory requirements have
been implemented.
Firms need to ensure that regulations have been suitably
embedded and should look to optimise their approaches where
possible.
This could for example include GDPR, PSDII, EBA Guidelines on
Internal Governance.
It is important that banks can demonstrate that regulations have been suitably embedded
Building Resilience to
operational disruptions
Increasing exposure to both IT and cyber risks, as well as
increasing awareness of the harm that operational issues can
cause, means heightened scrutiny of activity on
operational resilience.
Firms will need to show they understand their risk exposures and have the capability to deal
with any potential disruptions.
IBOR Transition
Pressure to transition away from LIBOR, with greater
regulatory scrutiny of whether firms are reducing their
exposure to LIBOR.
The need to prepare for a transition away from both
EONIA and Euribor.
Climate Change and Sustainability
Global, EU and national regulators are in the process of defining their expectations for
climate change risk management.
Amidst rising investor pressure and industry action, central banks and regulators will increasingly focus on the
financial risks that arise from climate change, and expect
firms to work towards managing them.
2019 financial services – cross sector themes
Value for money
A growing emphasis on the economic consequences that poor value products and
services have on consumers.
Regulators continue to focus on firms’ fees and charges across customer groups, and on the
transparency and comparability of products, and
will expect firms to apply clear and fair charging structures.
Also a focus on policies and procedures to ensure
vulnerable customers are not put at risk by poor conduct.
Insurance Sector Themes Investment Management Sector Themes
Business Model
Changing Roles
Pricing & Distribution Solvency II Review
Value for Money
Payment for Research Fund Governance
Product Governance & Distribution
Fund Liquidity & Leverage
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Questions & close