Thank you to all who attended our Compliance Challenges for 2023 Breakfast where Expert Trainer Martin Schofield discussed the challenges regulated firms may be faced with in 2023.
We discussed a range of potential issues, including the outcomes of the FCA Final Notices 2021-22 which revealed alarming statistics criticising policies, risk management frameworks, and training within the financial industry, as summarised below.
Policies:
According to the FCA’s Final Notices for 2021-22, a staggering 100% of the regulated entities examined were found to have policies that were subject to criticism[1], of varying degrees. This highlights a systemic problem within the financial industry and raises concerns about the effectiveness of policy frameworks. The nature and severity of the criticisms may vary, indicating that some firms’ policies require significant improvement while others may only need minor adjustments. Regardless, this blanket criticism calls for a thorough review and revamp of policies across the board.
Risk Management Frameworks:
In addition to criticised policies, the FCA Final Notices also revealed that 54% of regulated entities had risk management frameworks that were deemed inadequate or flawed. Risk management is a crucial aspect of any financial institution, ensuring the identification, assessment, and mitigation of risks that may impact its operations and stakeholders. The high percentage of criticised risk management frameworks raises concerns about the industry’s ability to effectively manage risks, potentially exposing firms and their customers to unnecessary vulnerabilities.
Training:
Training plays a vital role in ensuring that employees are equipped with the necessary skills and knowledge to carry out their roles effectively and ethically. However, the FCA Final Notices for 2021-22 indicated that 45% of the regulated entities examined had training programs that were subject to criticism[1]. This raises concerns about the quality and comprehensiveness of training within the financial industry. Inadequate training can lead to compliance breaches, misconduct, and a lack of awareness regarding regulatory obligations, posing risks to both firms and consumers.
Implications and Recommendations:
The findings from the FCA Final Notices 2021-22 highlight critical areas where improvements are needed within the financial industry. The criticised policies, risk management frameworks, and training programs collectively expose weaknesses that can lead to regulatory non-compliance, financial misconduct, and harm to consumers.
To address these issues, regulatory bodies, financial institutions, and industry professionals must work collaboratively. Recommendations to enhance the effectiveness of policies, risk management frameworks, and training include:
Policy Review and Enhancements: Regulated entities should conduct comprehensive reviews of their policies, identifying gaps and areas of improvement. Close collaboration with regulators and industry peers can help establish best practices and ensure alignment with regulatory requirements.
Robust Risk Management Frameworks: Financial institutions must strengthen their risk management frameworks by implementing robust processes for identifying, assessing, and mitigating risks. Regular risk assessments, scenario planning, and stress testing should be conducted to ensure resilience and adaptability.
Enhanced Training Programs: Firms should invest in comprehensive training programs that cover regulatory requirements, ethical conduct, and risk management practices. Regular training sessions, workshops, and assessments should be implemented to ensure ongoing competence and awareness.
The FCA Final Notices for 2021-22 shed light on concerning issues within the financial industry, highlighting the importance of regulated firms regularly reviewing their policies, frameworks and training to remain compliant and avoid fines.
How Can ComplyPortal Help?
ComplyPortal offers a range of modules to help your firm remain compliant with our Regulatory Compliance Management on an easy-to-use cloud-based platform.
Our Approvals, Attestations and Documents module can be used to aid your firm in ensuring Policies are always up to date, whilst our Risk module can be used to easily identify action points for unmitigated risk and ongoing monitoring. To find out more, book a demo here.
Our Partner firm LGCA can help you meet your training, professional qualification, and regulatory needs with e-learning, live online, and in-person courses and certificates. Get in touch today to find out more here.
[1] Burnett, C. et al. (2022) ‘FCA AND PRA ENFORCEMENT ACTION TRENDS AND PREDICTIONS’, PLC Magazine. Available at: practicallaw.com/w-034-1498.
