Conduct Risk - Significant Influence Functions - Congratulations or Commiserations?

Forensic & Litigation Consulting

February 12, 2014

Holding a Board member or senior executive position in a financial services firm used to be something to aspire to, but with stories of bans and public humiliation in the news, and both firms and individuals facing record fines, you would have thought that these roles would be and less attractive. Fortunately, there are many people undeterred by the challenges even though the “Senior Persons” and “Licensing” regimes proposed by the Parliamentary Commission on Banking Standards will increase pressure even further. In whatever form the proposals go ahead, what is certain is that the personal responsibility of Significant Influence Function (“SIF”) holders is set to increase. Many SIF holders will not be fazed - they are assertive and proactive, working hard to “do the right thing’. Others however will continue to be reactive, waiting for events to unfold, or passive in their participation in running a firm.

Aimed at new and experienced SIFs, and senior Human Resources and other support functions involved in appointing and supporting SIFs, this paper is designed to provide a clearer understanding of regulatory expectations. It contains insights gained from our work preparing SIFs for regulatory interviews, advising and mentoring SIFs following regulatory approval, conducting governance reviews and leading Board and SIF education programmes.

SIFs: Do you know what you need to know and what you don’t know?

In our experience, when individuals are appointed to SIF positions, including the “sought after” first Non-Executive position, they often fail to conduct a thorough due diligence process. That is a huge missed opportunity as that is the ideal time to dig deeper and find out what they are getting involved in, particularly anything that may fall into the “more work to be done” category.

1 New SIFs: Your role and responsibilities

Make sure you fully understand your responsibilities ensuring that you:

  • Understand all aspects of your role and your sphere of influence;
  • Agree with your team and all relevant colleagues the scope of your role;
  • Are given a job description that documents your role and that it is updated as necessary;
  • Understand how your division/firm makes its money;
  • Develop a detailed understanding of the risks in your division, both prudential and conduct risks, and how they are managed and monitored;
  • Are comfortable with the risk types and levels, and the level of mitigation and monitoring; and
  • Understand relevant current and emerging regulatory expectations

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