Looking forward into 2021, I see further momentum building for the two major trends the were evident in 2020 albeit they were largely masked by the turmoil created by the pandemic.
The first trend is the industry grappling with the challenges caused by unprecedented levels of regulatory change in recent years. From our own research we know that many firms are struggling to accommodate costly and resource hungry processes into their business-as-usual agenda; SM&CR being a good case in point. Firms that tried to use, what at first glance appear, simple solutions such as spreadsheets or paper have found themselves entangled in the significant levels of manual intervention required to ensure these methods are both kept up to date, remain an accurate reflection of reality and provide the oversight required by central teams and senior management. By contrast, firms that invested in bespoke solutions encountered the short-term cost and disruption of an implementation project, but now find themselves reaping the rewards of this investment in business-as-usual. New or updated regulation creates challenges for firms which, without investment in dedicated solutions designed to manage those regulatory processes, creates a major drain on firms’ resources. This may sound an obvious point but, in a survey question asked by us in a webinar in February, 70% of respondents said they were using paper and spreadsheets to manage SM&CR!
The second trend that I see continuing to grow in 2021 is the regulator’s focus on conduct, culture and governance. Despite the pandemic, through 2020 the regulator was consistent in the messaging, i.e. that regulation is not a ‘tick-box’ exercise, rather the foundation stone to wider culture change. The regulator has backed this up by starting to monitor firms’ culture using empirical factors; (see Julie Pardy’s recent blog on PRA Research On Culture).
This research provides indicators into the ‘cultural health’ of firms by using empirical factors, e.g. upheld complaints, late Directory returns etc. The indications are that the regulator will use factors like these to identify firms that require closer supervision. For me, this is a potential ‘game changer’. It means that, whether these indicators are right or wrong, the regulator will scrutinise the quality and timeliness of firms’ adherence to regulation as an indicator of ‘cultural health’. And, going back to my previous point, if firms are using manual based methods to manage regulation, two things are likely to happen:
- There will be a greater chance they will fall foul of one or more of the regulator’s empirical indicators.
- They will spend so much time focusing on the administration of regulation, i.e. the ‘small stuff’, they will have no time to focus on conduct and culture, i.e. the ‘big stuff’.
Sooner or later, these firms will need to invest in dedicated systems, i.e. RegTech, to enable them to focus on what the regulator is really looking for, i.e. culture change – the ‘big stuff’! That’s why I expect 2021 will be a busy and exciting time for us as firms look to Worksmart for the RegTech solutions to manage the ‘little stuff’.
If you would like to know more about how Worksmart’s RegTech solutions suite could help transform your response to people based regulation, contact our friendly and knowledgeable team on: 01908 613613 or email us on: info@worksmart.co.uk