COVID-19 has changed the way businesses work and put significant pressure on organisations across the globe. Not only is it unpredictable in nature, but it also brings new challenges relating to the workforce, customers, outsourced partners and technology infrastructure. New responsibilities and workload pressures are being placed on individuals to maintain operational continuity. Regulators continue to actively review how the financial sector responds to COVID-19 and provide guidance on managing the disruption effectively. As businesses adapt to the new norm, how are your senior managers discharging their individual responsibilities under the Senior Managers and Certification Regime (SM&CR)?

The role of Senior Manager Functions (SMFs)

SMFs need to be clear about their individual accountability in relation to the COVID-19 response. Most firms will already have a response plan under this pandemic in place, and this needs to be agile, to reflect the uncertainty of the current situation. This may mean changing day to day activities in order to take (and evidence) reasonable steps to manage the impact of the pandemic. These steps may include:

  • Assessing if they have adequate resources available to discharge SMF responsibilities.
  • Adjusting business practices, including working from home. Regulators expect SMFs to identify employees that are unable to perform jobs from home and support them accordingly.
  • Reviewing end-to-end activities of essential services to make sure SMFs are aligned in terms of the firm’s response plan.
  • Considering fit and proper assessments for SMFs to make sure they’re healthy and able to focus on business as usual and crisis management.
  • Making contingency plans in case a significant portion of the SMF’s team is unable to work.
  • Assessing current processes to make sure there is adequate segregation of duties and robust reviews. Management information needed should be reviewed and made available to enable SMFs to review anomalies.

The role of the CEO

The Chief Executive Function has a pivotal role to play in how the firms responds to COVID-19. During this time, firms need to focus on the activities, services, operations and outsource providers that, if disrupted, would impact the real economy or financial stability. The CEO is responsible for making sure there are proper processes in place to identify the essential individuals needed during this time.

Effective and regular direct communication from the CEO and other SMFs is essential for staff, customers, regulators and third parties, including outsourced business partners.

The role of the CFO

The Chief Finance Function needs to actively manage the firm’s financial resiliency and review the working capital requirements under various scenarios. The regulator expects the SMFs to implement processes to obtain up-to-date liquidity positions and mechanisms in place to notify the regulator if they believe they will be in difficulty.

The role of the COO

The Chief Operations Function is critical to keeping key business operations and essential services running during the pandemic. Key considerations should include:

  • Assessing the firm’s operational risks and making sure these capabilities are in place during the pandemic, to support essential services and promote operational resilience.
  • Making sure the technological infrastructure is in place to support remote working.
  • Identifying and mitigating the technology risks that may emerge under remote working such as GDPR risks, loss of data and cyber security.
  • Reviewing systems and controls to make sure the firm can continue to comply with regulatory obligations.
  • Revising impact tolerance levels under operational resilience and making sure processes are in place to manage them on an ongoing basis.
  • Continuously re-assessing the operational resiliency of outsource providers and suppliers who support important services. Regular contact with these third parties is key.

Managing handover documentation processes

Handover documentation is an important element of SM&CR, and more so with the potential for widespread absence due to illness. This should be up-to-date, and firms may want to re-assess how frequently these are updated.

The role of certified staff

Most certified persons will fall under key essential staff, as assessed by the regulator. As firms identify these workers within their own business, it may be a good time to reassess the individuals who should be certified. This will include people who make key decisions and are integral to essential activities, services and operations.

The role of the board

The board and other key governance committees should be leading good governance throughout this period of uncertainty. Relevant and timely management information is critical for making informed decisions, and this should be available at a higher frequency than under business as usual. Firms may also rethink practical elements of how they operate. Non-Executive should have the systems and capacity to work remotely and to enable effective challenge of the Executive. Corporate secretariat will need to be agile and rapid in its response as it ensures that adequate records of all key decisions, together with associated challenge, are properly recorded in order to stand up to inevitable future scrutiny.

What to do now

Good oversight and governance are critical during periods of uncertainty, and SM&CR application needs to be agile to respond effectively. As a starting pointy, firms should assess their essential services and associated activities to determine the key personnel required. Building on this, systems and controls should be assessed to make sure they are able to mitigate emerging risks or the increased likelihood of existing risks occurring. Policies and procedures should be reassessed to include alternative and/or additional controls to mitigate new and emerging risks. Key documentation should be reviewed including management responsibility maps, statements of responsibilities, policies and procedures, and management information, as well as third party contracts.

While protecting customers is the end goal, firms need to maintain financial and operational resilience. Firms should also take the lessons learned from their COVID-19 response to ensure SMFs continue to be able to manage in the future.

Sonia Shah - Grant Thornton Financial Services Group

sonia.h.shah@uk.gt.com

FS COVID-19 hub - https://www.grantthornton.co.uk/en/insights/covid-19-for-financial-service-providers/