SMCR compliance: Software vs Manual Process

09 June 2021

SMCR compliance: Software vs Manual Process

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Now that the deadline for SMCR compliance has passed, you may be adjusting to new ways of working and managing your regulatory obligations. Perhaps you are using a manual process, such as spreadsheets, or existing HR systems to keep on top of SMCR requirements. Or maybe you are using a combination of these methods. For firms of a certain size, this might pose some challenges. The complexity and scale needed for complying with SMCR means that technology could make your life a whole lot easier.

So, in the battle between software and manual processes, who comes out on top? We examine both options to help you work out the best way to ensure SMCR compliance for your business.

Manual processes

While it may be possible to manage the requirements of SMCR with spreadsheets and paper-based systems, many firms who followed this approach found that it proved ineffective. Let’s take a look at why this was the case.

You will have insufficient controls

SMCR is a data-heavy regime with many moving parts and a plethora of individuals involved. Managing this process as a paper-based exercise opens up the potential for exposure with no controls to:

  • Verify information
  • Central point
  • Audit trail
  • Feedback
  • Pro-active management
  • Track progress

There’s a lack of governance and oversight

Industry feedback has indicated that businesses operating SMCR as a manual process have struggled with governance and oversight. There is no way of tracking where individuals are within their F&P process, no formal sign off, a limited audit trail, and variable continuity of issue reporting dependent on the individuals involved. What’s more, manual approval of new Statements of Responsibilities (SoRs) relies heavily on emails. This can be challenging, especially when maintaining auditability and oversight is so imperative.

There’s an increased risk of errors

Manually collating and checking data and records, especially at the scale SMCR requires, can lead to inaccuracies. This does little to reassure senior managers, who have the most at stake when it comes to non-compliance. Given their personal responsibility, firms need to give senior managers greater protection and confidence in the accuracy of records and audit trail.

It’s time-consuming and inefficient

A typical, medium-sized firm could easily have over 100 existing or new policies and processes impacted by SMCR. As well as this, you must maintain, keep evidence for, and update your Responsibility Maps, SoRs, Reasonable Steps Policy, Handover Policy and more.

One bank updated their Management Responsibilities Maps, which have to be submitted to the FCA, 12 times in the first 24 months. Their SoRs, which covered approximately 20 senior managers, also had to be updated over 200 times. Another bank performed manual updates to six SoRs which required approximately 80 man-hours of effort.

It goes without saying that you could probably spend those 80 hours doing something more productive. Dominic Crabb, Chief Compliance Officer at London & Capital, has concerns regarding the laborious nature of SMCR: ‘Senior managers, by their very nature, are busy people, so will they need to step back from some of their roles to allocate enough time to it?’. If you are using a manual process, the answer is most likely a resounding yes.

Remote working brings further challenges

The recent global shift in ways of working since the COVID-19 pandemic has worsened the challenges that manual processes bring. Despite having robust policies in place, and the FCA extending some key deadlines, many regulated businesses have still struggled.

The certification process, for example, involves a wide range of individuals often across multiple disciplines and locations. This would be tough to control manually in itself, but throwing remote working into the mix can cause havoc for businesses. With limited checks and balances, people could be missed out or even certified incorrectly.

Businesses have also had to consider how they will ensure effective communication and oversight while working remotely. And, as we move to a more remote world, senior managers are inheriting new areas of responsibility. Having poor control mechanisms could lead to missing information regarding topics such as governance frameworks, operational risk, conduct risks and key projects.

Software solutions

With manual processes seeming inadequate in helping you achieve SMCR compliance, do digital solutions fare any better? Let’s take a look at the benefits of SMCR technology.

You will have better controls and improved efficiency

By automating compliance and implementing a system that places transparency at the heart of business operations, technology offers an opportunity for firms to apply more stringent controls that mitigate the risk of human oversight or inefficiency. For example, with an SMCR solution, the Certification process can be automatically scheduled, communicated and actioned, requiring no manual intervention whatsoever.

There’s increased transparency

Having a holistic view of compliance processes, statuses, shortfalls and areas that require attention is imperative. While manual processes can make maintaining governance and oversight challenging, particularly during remote working, software solutions provide your business with greater transparency over your SMCR compliance efforts. For example, by storing information centrally in a digital system, appropriate people across your business – and the FCA – can easily access what they need.

It’s safer

As a result of these tighter controls and improved transparency, SMCR software solutions can help you manage risk and compliance in a far safer way – leaving behind the risk of inaccuracies and errors of manual processes.

You will save time, money and resources

Remember the bank that manually updated six SoRs, taking them about 80 hours? With SMCR software, the same task would take 90 minutes with a guaranteed and consistent result. Automated processes require little or no manual intervention, allowing you to focus on your role and the important tasks that technology can’t do. What could have taken weeks could now be completed way before lunch.

Minimise the risk of malpractice

By using SMCR technology, you will be implementing a far more competent system to help you manage SMCR compliance and minimise the risk of malpractice across front, middle and back offices. Senior managers can be confident in the consistent application of controls, taking away the pressure and stress that comes with your regulatory obligations.

Next steps

Having explored the differences between manual processes and SMCR technology, it’s clear that using a digital solution has many benefits that antiquated paper-based systems and spreadsheets simply cannot achieve. And when the consequences of non-compliance are potentially severe, including, imprisonment, and reputational damage, is using a manual process worth the risk?

Find out more about how technology can ease the pain of SMCR compliance with our free Quick Start Guide.

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Written by

Abbie Glossop

As Digital Content Executive at Ideagen, Abbie is responsible for writing engaging and educational content for Ideagen’s digital channels. With a background in writing and social media, Abbie is committed to understanding the needs of our customers and providing insightful and valuable content that helps them to achieve their objectives.

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