“COVID-19 was the first litmus test of SM&CR, and a very severe test it was. Did the statement of responsibilities clearly identify the person responsible for coordinating the company’s response to a crisis or did senior managers turn to their CEO for all decisions by default? When the FCA requested for key workers in financial services to be identified were firms able to comply promptly?
“Firms that successfully embedded SM&CR were undoubtedly able to respond more quickly, with senior managers able to control and manage the situation in line with their responsibilities.
“The relaxation of rules, such as extending the 12 week rule for temporary cover of a senior manager to 36 weeks was well thought out and allowed firms whose senior managers had been affected by COVID-19 to appoint a temporary replacement for a more realistic length of time.”
Responsibility in a crisis
“Firms that made the effort to clearly list their “other responsibilities” were able to respond more quickly because they had collectively identified responsibilities, and specifically, the best individuals to take on those responsibilities, well in advance. As the COVID-19 crisis hit, those firms were better prepared to respond to the redeployment of personnel, remote working adjustments and reallocation of resources such as staffing, computer hardware, cash and capital, whilst ensuring clients were still well looked after.
“It is clear that simply going through the motions of allocating senior management functions and prescribed responsibilities was not sufficient. SM&CR must be properly embedded into the culture of a firm in order for its benefits to be felt. Responsibilities must also be regularly reviewed, updated, and removed when no longer needed, in order to keep up with ongoing changes.”
Lessons for the future
“While the identification and allocation of responsibilities are important, the transparency and dissemination of that information is even more important. Having the information on paper, filed away in the office somewhere, is not effective when most people are working from home. An online SM&CR system is able to administer, evidence and inform in a much more efficient and effective way.
“SM&CR must be taken seriously because firms that were unable to respond appropriately during this crisis, especially where clients were disadvantaged, may have to account for who was responsible, and how individuals discharged their responsibilities. We may see the ‘reasonable steps’ test being used to assess the actions of senior managers and responsible individuals in due course.”
