discussion

Governance: time for spring cleaning?

EMEA Publication April 2022

As springtime arrives many of us are looking at how we can de-clutter our homes. For some the key area of focus is the garage which often houses broken sports and/or garden equipment, a lawn mower that has seen better days and, perhaps, dusty and unused wellington boots. Organizational clutter can take a number of forms for firms, the most common being redundant or duplicative processes, organizational structures and reporting lines that are no longer fit for purpose and objectives that are no longer relevant.

Whilst firms have been taking steps to update their governance arrangements to manage the regulatory and reputational risks arising from the sanctions on Russia, many of them are now starting to think that it may also be the time to do a wider spring clean of their internal arrangements so that they are fit for purpose in the future.

One reason for this may be that objectives and organizational structures require a fuller review in light of the wide ranging impact of the sanctions or that the exercise has revealed certain hangovers from earlier times which are no longer relevant. Another reason concerns minimising regulatory risk. Governance has always been a hot topic for the regulators and by having an annual refresh the firm (and its senior management) may be in a better position to deal with a regulatory enquiry or a section 166 request as the enhancements would improve existing arrangements and help demonstrate to the regulators proactivity.

So what should be spring cleaned?

There are a number of areas to which a firm could apply a duster including:

  • Responsibility maps, reporting lines and statements of responsibility – up to date? 
  • Allocation of responsibility – need adjusting to include new developments?
  • Information flows – keep a close eye on what the regulators are saying. Whilst firms are focussing on sanctions related updates don’t miss other important announcements.
  • Management information – is it capturing the right things?  Have there been changes to the business particularly in light of the sanctions?
  • Monitoring systems – do they need recalibrating?
  • Terms of reference – still reflect current remits and aims – any new committees/steering groups which need them?
  • Minutes and record keeping – all up to date?  Any new committees?
  • Any informal discussions/groups that have grown up need formalising and bringing within the structure?
  • Resourcing and training – need to devote some additional resource to governance arrangements (has been a recent criticism of regulators)?
  • Debate and challenge – is this happening effectively and are there records?
  • Diversity – does the board and other parts of the business reflect the regulators’ expectations as regards diversity and inclusion?
  • Products and processes – do these need updating in light of forthcoming new regulatory requirements like the consumer duty?

We can provide assistance at various stages and levels during a governance spring clean including: 

  • Supporting in setting up and scoping the review.
  • Undertaking the review (including the gathering and assessment of information and delivery of workshops/interviews with key stakeholders).
  • Considering potential enhancements to existing arrangements.
  • Assisting with presenting findings to senior management.


Contacts

Co-Head of the Contentious Financial Services Group, London
Global Director of Financial Services Knowledge, Innovation and Product

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...