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Senior Managers & Certification Regime: Risk culture, accountability and what it will mean for higher management roles
12 September 2017
Dr Roger Miles researches behavioural risk and the impacts of conduct regulation. He counsels Boards on human risk factors and uncertainty, and delivers bespoke risk workshops for leadership groups in government, NGOs and the professions. He teaches risk-related psychology at graduate schools including Cambridge University and the UK Defence Academy and co-edits the Behavioural Economics Guide and publishes best practice guidance notes through professional bodies including UK Finance, the Association of British Insurers (ABI), Global Association of Risk Professionals (GARP) and the Institute of Operational Risk (IOR).
He will be delivering a session at the UK Credit & Collections Conference (UKCCC) on 14 September about risk culture, accountability and what the Senior Managers & Certification Regime will mean for higher management roles, as part of the conference’s compliance stream.
Following the FCA releasing its consultation on the extension of the Senior Managers & Certification Regime (SMCR) to all regulated financial services firms, I will be encouraging UK Credit & Collections Conference delegates to look more deeply at their risk culture, accountability and what certification will mean for those in higher management roles that will be impacted by the regime.
The move to behavioural regulation
Financial services firms are used to approved persons, but this goes much further. It is a new approach to regulating financial services which focuses on behaviour, with conduct risk at its core.
Regulators like the FCA intervene assertively to challenge financial service providers to show clear evidence of a new customer-centric approach, which understands and responds to the hidden drivers of customer behaviour. They use their unprecedented powers to levy very large fines and even to imprison wrongdoers - often for not taking precautions rather than for any active wrongdoing.
My book Conduct Risk Management, which I will be sharing insights from at the conference, gives financial service providers the practical tools they need to understand the hidden drivers of behaviour, de-bias their customer offering and so avoid fines and imprisonment under the conduct regime. It is a tool for recognising, acting on, and predicting conduct risk impacts in regulated business.
Beyond ‘box ticking’ – good behaviour is good business
Conduct Risk Management sees beyond econometric and other 'box-ticking' traditions of risk management. Whilst protecting senior managers, it helps all staff to make positive use of conduct risk to promote behaviour the regulator will accept as 'good', as good behaviour is good business. The new conduct regulations personally affect every manager in financial services, and their suppliers, with new regulations making senior managers liable to imprisonment for failures in organisational conduct.
What this means for the debt collection sector
It is now widely recognised within the debt collection sector that there is both a commercial as well as an ethical case for putting the customer first. Behavioural regulation is the key to making this a reality rather than a ‘nice to have’. Managers and boards in the debt collection sector need to overcome their fear of conduct risk in order to fully embrace a customer-centric approach. I’ll be providing delegates with an understanding of what conduct risk means in practice in their organisations and how it will benefit the customer, staff, and the organisation.