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5 key technology considerations for managers to meet SM&CR standards

Written by Bryn Morgan

Friday, 8 March, 2024

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The Senior Managers and Certification Regime (SM&CR) is in place to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence within financial service organisations.

Depending on the size of your business, responsibility for certain key areas of risk can be outsourced however in all these instances, accountability still stays with your firm and in line with SM&CR, with senior members of staff personally.

When looking at information technology and cyber security, Senior Management Responsibilities sit in the following 2 areas:

  1. Overall accountability – As ultimate accountability remains with the senior management of the business, be clear when selecting a partner that they can manage your regulatory responsibilities, as well as manage appropriate levels of risk for the outsourced service. Ensure you have a clear view of what you are asking to be managed and be clear that the provider has a mature process to discuss levels of risk with you and your company continually throughout their contract, as technology systems or services change.
  2. Prescribed responsibilities – As senior managers you may be assigned responsibilities relating to your IT and cyber security related to your outsourcing arrangements. It is therefore important to take these seriously and ensure they are managed to the correct level and at the right cadence of repetitive requirements.

Here we highlight the 5 key considerations for management:

1. Risk management

Risk assessment – Firms must regularly conduct a thorough risk assessment of their IT and cyber providers. These assessments not only need to be done at the outset of taking on a new provider but also during the contracted term.

Documentation – Clear documentation of risk assessments, risk mitigation strategies and the rationale for outsourcing is essential. This documentation will serve as evidence of due diligence in the case of regulatory scrutiny.

2. Contractual considerations

Clear contracts – Ensure any contract you are entering into clearly specifies roles and responsibilities without ambiguity. Ensure the contract allows you to comply with relevant regulations, security standards and requirements such as data protection which should be clearly outlined.
Right of access – Both your clients, investors and ultimately the regulator will need to have audit rights over your provider. Be clear from the outset about what could be required and where your provider can assist you with these requirements for your business.

3. Business continuity and contingency planning

Business continuity – You are accountable for ensuring your business has the relevant plans in place in case of a disaster scenario. You are accountable for making sure your IT provider has their parts of your service covered in this respect, so be clear they understand their responsibilities and have the technology disaster recovery plans in place for either a disaster in your business or importantly theirs.

Contingency planning – Develop contingency plans for the potential termination or transition of your IT and security services. You should understand the steps for moving to a new provider or to bring the service in-house. This should also be clear within your contractual exit framework.

4. Training and awareness

Be sure to understand what training individuals need in your organisation, whether it be general or for specific roles holding accountability. By doing this your staff can be clear of the regulatory requirements and stay abreast of best practices.

5. Stay informed on regulatory changes

Regulation changes all the time so it is important to keep abreast of what is changing within the marketplace. Regularly update procedures and ensure a clear communication plan within your business to cascade these changes into your organisation. Encourage others to keep ahead of changes specifically within their specialism.

Financial services firms and partners working together

In summary, SM&CR has huge implications when it comes to Information technology and cyber security. In an ever-changing technology and regulatory landscape, it is essential for both financial service companies and those who work within them that both responsibilities and accountability are understood in detail. It is important to form and manage clear processes to navigate the complexity of outsourcing.

Would you like to understand more about the considerations required for SM&CR when looking at IT?

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