Covid-19 has turned the FinServ world upside down and – as a result – governance is almost certainly weaker in many firms than pre-Covid. With most employees working from home (WFH), the traditional office-based controls have evaporated. You would expect firms to be paying closer attention to Training & Competence (T&C) to strengthen compliance. However, it would appear the reality may well be rather different.
In a recent Training & Competence webinar, artificial intelligence provider, Elephants Don’t Forget – in conjunction with ClearStep Consulting – polled a cross-section of representatives from financial services firms and found that, despite the employee migration to WFH, 40% had not changed their approach to T&C throughout the Covid-19 pandemic.
In a secondary poll, responses from the participants established that a significant 66% of firms were ‘not confident at all’, ‘slightly confident’ or only ‘somewhat confident’ that their Senior Managers could demonstrate a consistent approach and application to T&C.
Assessing the impact of the responses, Adrian Harvey, CEO of Elephants Don’t Forget, said: “We are a year into Covid-19 and it was surprising to still see firms openly stating that nothing had changed in terms of their approach to T&C over the last year. The really concerning thing is that, for those that said nothing has changed in terms of their governance monitoring and T&C application, the regulator has issued enough recent warnings to signal that these firms are miles off from meeting regulatory and consumer expectations.”
In the webinar, available here, participants were also invited to provide feedback regarding the primary areas that their respective firms found most challenging in relation to T&C.
Ranging from recruitment to record-keeping, the top three primary issues for compliance and risk practitioners were collectively recorded as:
- ‘Attaining Competence’ (Induction, training timelines, how will employees attain competence and what happens if they do not).
- ‘Maintaining Competence’ (CPD, ongoing assessment, absence, and failure to maintain wider market, policy, process, and consumer considerations).
- ‘Supervision’ (Evidence-based assessment of competence and compliance adherence).
Harvey noted: “Most pro-active professionals operating in risk and compliance would assert that improving their monitoring capabilities to ensure better decision-making and risk evaluation is a priority.
“If you were to look at the 40% figure as indicative of the changes not made and apply it to the 60,000 or so firms that are operating right now, that could effectively mean that around 24,000 firms have not made any substantial changes to their governance or competence assessment processes in a year, which is extremely concerning considering the situation we have found ourselves in with many (traditional office-based) employee monitoring and development mechanisms disappearing almost overnight last March.
“From recent guidance issued on the treatment of vulnerable consumers, I think it is also undisputedly apparent that the regulator is now actively reiterating the importance of objectively monitoring employee competency and in-role application more often and more robustly too.”
Harvey refers to the recent publishing of the regulator’s FG21/1 Guidance for firms on the fair treatment of vulnerable customers, which underlines the importance for firms to ‘carry out proactive data analysis to identify where vulnerable customers are more likely to suffer harm when things have gone wrong or where there are patches of poor staff knowledge and performance’.
Harvey concluded: “Most firms’ traditional compliance and governance structures – whilst better than in a WFH situation – still struggle to meaningfully quantify relevant employee knowledge, so banking on a return to the office to solve the problem might be a flawed strategy.
“In the FCA’s latest vulnerable customer guidance, the regulator is highlighting that all staff require more effective support in terms of T&C programs to deliver the positive outcomes necessary for every employee – within their induvial roles – to successfully adhere to the myriad of developing policies, processes, and governance at all times.
“The call from the regulator for firms to proactively identify knowledge gaps or poor performance illustrates that there is a genuine concern that a lack of objective and evidenced-based competency and conduct monitoring, combined with a deficiency of continual stress-testing for gaps, is only manifesting more potential instances of causing unnecessary harm to consumers and the market in general.
“For me, it is the moment of truth between when one employee – most probably working from home – and one customer interacts, and it is the extent to which that employer has supported and appropriately skilled that individual which will ultimately determine the positive or negative outcome.
“The need for exacting, consistent and evidence-based T&C is required, with a strict mantra: train, retain, fix, and follow.
“If your firm has not made any changes to your governance or T&C application, and you cannot evidence or monitor that your employees are successfully applying what you need them to, then you are at risk – it is that simple.”
