RegTech, SMCR & Good Governance – Q&A

Posted On 04th September 2018

We’re just over a week away from the upcoming UK Credit & Collections Conference 2018. As a taster of what will be discussed on the day, we’ve carried out a Q&A with RegTech expert, Ian Wilson and leading SMCR expert, Julie Pardy to get their take on good governance, RegTech & the upcoming extension of the SMCR.

Q. Why is good governance more important than ever in 2018?

Ian Wilson;

The FCA already has stringent systems and controls (SYSC) compliance expectations on firms, which must be adhered to and evidenced.

The 2018/19 FCA Business Plan highlights that they “believe it is important that all firms, regardless of size, are well governed and that individuals are accountable for their actions. Firms should be able to show the effectiveness of their governance arrangements in identifying, managing and mitigating the risk of harm”.

In addition, in March 2018 the FCA Approach to Supervision consultation paper highlights that “when it comes to governance, we assess effectiveness, not merely design. We pay particular attention to a firm’s conduct risk framework, i.e. whether the firm has effective governance arrangements in place to identify the risk of harm to consumers and markets, and whether they have a strategy in place to manage and mitigate those risks”.

Furthermore, the Extension of the SMCR will come into force for all regulated firms on 9th December 2019, placing greater scrutiny on Accountable Individuals and Senior Managers governance arrangements.

Julie Pardy;

Due to the advent of “individual Accountability and Duty of Responsibility” under SM&CR, it is critical that firms can evidence good corporate governance to the regulator and also where relevant to their shareholders.

Good corporate governance tends to demonstrate that firms have the right culture of accountability, transparency and oversight, because a good culture starts at the top, and if the governance is good from the top down it tends to be an indicator of “doing the right thing”.

From a regulatory perspective a firm has to meet “Threshold Conditions” and part of that is a business must be structured in such a way that it can be easily and effective supervised and overseen by the FCA.  If a firm is well governed, this will make it in turn easier for the FCA to supervise them and that in turn should give the regulator confidence about the senior management.

Q. Why is RegTech a good solution to handling FCA regulation?

Ian Wilson;

RegTech is specifically designed and purpose built to enable firms Accountable Individuals and Senior Managers to implement and evidence effective governance frameworks.

The FCA actively encourage and promote the use of RegTech and innovation as best practice, as highlighted in their 2018/19 Business Plan.

RegTech solutions provide a Governance Risk & Compliance (GRC) framework for a firm to manage audit, compliance and risk management processes and drive the right customer outcomes through high standards of culture, conduct and governance controls.

Manual GRC frameworks such as Excel are extremely labour intensive and exposed to human error, not least they don’t provide real-time management information and reporting capability with a full audit history and evidence of compliance.

RegTech provides a configurable and flexible capability to automate manual GRC processes to improve operational efficiency and reduce costs.

Julie Pardy;

RegTech is the FCA’s approach to appeal to both systems and software solution providers to provide innovative way in helping regulatory firms manage their business and meet regulatory requirements.  There is an increasing focus on how the FCA can assist firms by encouraging innovation in solution design and supply with a view to creating more effectively run businesses.

The FCA are under pressure from firms over already spiraling costs in terms of complying with regulation.  Any solution development that can be fostered in the market that either a) brings business and efficiency gains or b) meets regulatory demands whilst also hitting business efficiency gains will be seen as a win-win.

In an increasingly complex world where time is of the essence, and there is little room for regulatory issues, the use of RegTech provided by firms that have their knowledge, expertise rooted in the Financial Services markets is surely the way to go.

Q. How can CSA members best prepare for the impending SMCR extension regime?

Ian Wilson;

It is all about learning from organisations and individuals who have already been involved with SMCR. This can be done by engaging with solution providers whom have existing experience with helping to implement SMCR within organisations within the same industry.

CSA members whom are looking for a solution to help manage their SMCR implementation can contact Arctick here.

Julie Pardy;

Reach out to trade bodies for support/learning opportunities from firms and individuals that have already been involved in SM&CR.

Talk to a firm that can provide support/solutions that are already tried and tested in that market place.

Allow sufficient time in order to manage the project in – namely 6 – 12 months size dependent.

Ensure project teams have representation from all key areas such as HR, Ops, Compliance, Risk, Legal – it will be a more successful project if it has.

Ensure that the project has executive backing to ensure success.

Secure the project budget early so you have sufficient for your system solution and training needs.


Ian Wilson will be sitting on the ‘Culture & Governance’ panel at the upcoming UK Credit & Collections Conference on the 13th September, and will be on hand to answer any questions you may have surrounding good governance, FCA regulation, RegTech and SMCR.