Six months in - what has changed with the introduction of the Senior Managers Regime
08 September 2016
The Senior Managers Regime has now been live for six months. Has it made a significant difference to the way in which people are working? Or how the Regulators are supervising? It is perhaps too early to have a definitive answer to those questions but it is clear from talking to senior managers that it is changing the way in which they think about their responsibilities and the reasonableness of their day to day actions.
In a previous blog, I likened the start of the regime to the start of a challenge and raised the question of whether the preparations that senior managers and organisations had made would be sufficient. My challenge of trekking to Everest base camp is now only two months away and I'm realising that in some areas I need to do more to be able to cope with the journey ahead. I think the same is true for some senior managers.
When the regime went live, most senior managers felt comfortable that they understood their responsibilities and that they were taking reasonable steps in discharging them. Over the last six months, however, as issues have occurred, which inevitably they will, they have thought about how external observers, including the Regulators, might perceive the issues and the actions that they had taken. Were the actions reasonable? Did they support the desired outcomes in a proportionate way? Would they stand up to scrutiny? Some have concluded that perhaps they do need to do more. They may need better and more regular interactions with their direct reports so that they really understand what they are focused on, the exceptions they are seeing and the actions they are taking to address them. They may need better management information which allows them to review progress and issues promptly and decide upon actions that are needed. In some cases, they may need different, or perhaps more, people who have the right skills and attitude to support them in their roles. We're therefore starting to see senior managers make changes to their governance, people, processes and controls.
We've also seen changes at the Board level. There is more challenge of issues and more comprehensive documentation of what has been discussed. Whilst most of the challenge has been considered helpful, we have heard examples of where Board members appear to be challenging solely so that they can ensure that it is minuted and they can therefore demonstrate that they have questioned management. This is perhaps an inevitable consequence of the start of a new regime but hopefully as individual senior managers become more comfortable in their roles, the challenges made will always be constructive.
With many firms undertaking cost reduction exercises and considering the potential impact of Brexit on their business, the need to have the right people making complex decisions on the basis of robust information and strong governance and controls has never been greater. The work that firms and senior managers have done to consider their responsibilities and the reasonableness of their actions will therefore be tested further over the next six months of the regime. Will your preparations continue to be sufficient?
To help answer this question, we have developed a set of interactive scenarios which will explore the underlying principles of the regime. We start with considering how well firms and individuals understand the regime. Let me know your thoughts in the comments below.
Click here to view our report 'What it really takes to sleep soundly at night'
Click here to try our first interactive scenario 'Understanding the regime'