GRP among first firms to link SMCR regime with HR practices

UK insurance intermediary group Global Risk Partners (GRP), led by industry veteran Peter Cullum, is one of the first insurance firms to partner with performance management software business Actus to link Senior Managers and Certification Regime (SMCR) compliance with people management practices in order to positively impact cultural change.

The SMCR was initially introduced by the FCA in March 2016 for banking organisations. The regime aimed to change regulations for those working within the financial services sector in order to reduce harm to consumers and strengthen market integrity by creating a system that held individuals to account.

According to the FCA guide for solo-regulated firms, updated in July 2019, the SMCR has been designed to encourage senior staff to take personal responsibility for their actions, improve conduct across all levels of their business and to make sure that firms and employees overall clearly understand and can show who is responsible for what, in terms of accountability and conduct.

In May 2016, the SMCR was extended to apply to all FCA regulated firms, including claims management companies (CMCs). Furthermore, insurers were included in this broad governance brushstroke from 2018, while solo-regulated firms had a December 2019 deadline for compliance requirements.

Affecting culture change

According to Lucinda Carney, chief executive at Actus, compliance obligations can often be treated as a “tick box exercise”, however, in her opinion, this is letting a vital opportunity slip through brokers’ and insurers’ hands.

She said: “The point of the SMCR regime was about culture change and, frankly, I don’t see very much culture change yet. I’ve been flabbergasted by some parts of the financial services industry in terms of its approach to HR and its approach to people management because [it is] quite old-school and really behind the times compared to almost every other industry.

“In many firms, essential HR processes are on Excel or paper, so they’re really not managing people very well. The FCA [has brought in] SMCR in order to deliver culture change, to deliver an actual culture of low risk.

“Often in the compliance world, people treat it as a tick box exercise and our approach is trying to help organisations actually integrate SMCR with people performance management. If it’s done well, [firms] will be more effective in managing talent, they will be better at retaining people and they’ll come into the 21^st century in terms of their people and HR processes, and then they are much more likely to reduce risk.”

People processes

So, if the key to effective culture change is the successful integration of HR and SMCR, what is Actus suggesting as a solution here?

Carney explained that Actus has built a specific, standalone module within its performance and people management software called Actus Comply – this deals solely with SMCR compliance.

The module enables firms to allocate responsibilities to senior leaders, show when these responsibilities have been accepted and evidenced, creates an audit trail around this activity, offers point-in-time reporting and produces statements of responsibility. The software further allows firms to stay on top of this data and manage it on an ongoing, annual basis. “That’s the purpose-built module,” Carney added.

Actus launched the new module in February last year.

“We’ve got something that is an integrated performance management and compliance process and that’s logical,” Carney said.

“This is where HR and compliance should work together in order to put in both processes at the same time because that will give them a long-term solution. But it does mean waking up culturally from an HR point of view, not just a compliance point of view.”

Reducing the admin burden

GRP, which employs 1,500 staff, is one of the first firms to engage with Actus Comply. Operating around 35 individual legal entities, with each entity needing to be managed and reported on separately, would have created a huge administrative burden on the organisation – hence why a software-based solution was used.

Carney reported that to date, Actus has 60 legal entities on its system for Actus Comply, with active discussions taking place with a further 20 businesses.

“The FCA has provided increased incentive for change by shifting potential penalties for SMCR breaches from the firm to the individual, but only a handful of senior leaders are acting as true trailblazers for behaviour change currently,” Carney added.

“Perhaps it is down to HR and compliance to help senior managers realise the potential personal risks that could arise from not taking the regime seriously.”