What is SM&CR?

The Senior Managers and Certification Regime (SM&CR) is a UK financial services regulation designed to address failings that became apparent during the global financial crisis, specifically addressing the responsibilities and accountability of senior managers and roles that expose the firm to risk. The Senior Manager rules lay down requirements for accountability, realised in individual Statements of Responsibility for senior roles and a Management Responsibility Map (MRM) which seeks to ensure the coverage and integrity of accountability as implemented in a firm’s organisational model. The Certification Regime requires that firms regularly assess the fitness and propriety of those that can have ‘a significant impact on customers, the firm or market integrity’. Certification to perform such a role must be refreshed at least annually. The additional Conduct rules specified in the SM&CR require supervised firms to identify and disclose breaches to the FCA.

The intention is to embed a culture of accountability in the firm, to promote and embed good governance and control, and to flush out the problems of misaligned incentives and moral hazard.

The Challenge

SM&CR represents a significant challenge to supervised firms across the financial services industry. They need to identify correctly the respective Senior Management and Certification populations and ensure that the organisational structure and the individual roles and responsibilities that are its building blocks allow for the complete and unambiguous allocation of accountability.

How are our clients responding to the challenge of SM&CR? The principal question to resolve is: ‘Who owns the problem?’ The SM&CR clearly impacts across functions, including business, operations and technology, but in our view, Human Resources is key. Human Resources manages recruitment, retention, learning and evaluation, is custodian of people data, and with senior management, is the ultimate owner of corporate culture. Our view of SM&CR is that Human Resources becomes a first line function, responsible for the firm’s business and the identification and mitigation of risks. The SM&CR imposes specific requirements that must be embedded in the Human Resources process to ensure clarity, consistency and integrity of accountability for the conduct of the firm.

In this respect, Compliance remains a second line function, responsible for monitoring and policing the response of the firm to the prevailing regulatory framework. From a practical perspective, while Compliance must be a stakeholder, we regard Human Resources as the owner of the SM&CR challenge.

Our Solution

How is this responsibility discharged? Firms need to define the Management Responsibility Map by specifying roles and allocating responsibilities, and to manage the Certification process. For large financial services firms already operating under SM&CR, this is proving a significant challenge. In many cases, functionality has been developed piecemeal, meeting low-level requirements but failing to deliver a coherent overall framework.

At an operational level, the key requirements to embed SM&CR in the Human Resource Management process are support for data aggregation, management information and workflow. SAP and NTT DATA address this challenge through our SM&CR solution. Based on the market-leading SAP Success Factors Human Capital Management suite, delivered as a cloud solution for flexibility and scalability, and combined with NTT DATA’s capabilities as a provider of Human Resources consulting and technology implementation services, the solution delivers pre-configured functionality whilst retaining the flexibility necessary to adapt to each firm’s structure and culture. Our aim is not only to accelerate SM&CR compliance by giving firms the tools to demonstrate governance and control and address administrative overhead, but to empower Human Resources to fulfil its strategic role as enabler of best practice for corporate governance and to give those subject to SM&CR obligations the tools to achieve #selfcompliance.

Join the discussion at uk.nttdata.com/SMCR and register for our Brunch Briefing in London on 13th November.