Staying ahead of the game - safeguarding for the future

Deem NaPattaloong our consultant managing the role

Looking forward to the end of the year, it is unfortunate to state that the Covid crisis is still a huge part of our lives, and with this comes the expanding impact on the global economy. True, a few sectors have done well under lockdown conditions but they have been the exception. It has been suggested that by the time this crisis is over, it could, through the destruction of the economy, cause much more harm to the financial system than the 2007 financial crisis, with talk of a V-shape recovery becoming muted. The future is somewhat unknown, and with no vaccine, the virus will continue to change the world we know.

The financial sector

One particular sector which has weathered the storm is banks and other financial intermediaries. They did this by being quick to react and adjust to the new business environment. An environment that requires more attention to liquidity management, conducting business over a long distance, and offering more time and support to their clients.

However, the real test will come when the debt moratorium ends. Banks will need to have a clear picture of the outlook of their clients and their new risk profile. "


Brexit in the background

There is also no forgetting Brexit, rearing its head in the background of the pandemic. While we wait for a negotiated deal, the outlook is still concerning, as things will not be the same for most businesses moving forward. A new normal and a new kind of relationship with the EU requires a full-scale reassessment of risk. Banks and other financial intermediaries will need to upgrade their risk management systems, just like they did post the 2007 financial crisis. Like before, banks that stay ahead of the game will emerge as clear winners. 

Safeguarding for the future

  • Risk - when the ceiling has been lowered on the revenue front, it makes sense for banks to focus their attention on risk, and to put in more efforts to minimise foreseeable loss. Among other things, banks will want to recalibrate their credit risk models, taking into account the varied impact of Covid on all the economic sectors.
  • Credit quality - financial institutions will need to reassess the credit quality of their clients after they emerge from the crisis; paying particular attention to those in sectors that had been more exposed to the fall out. New data and assumptions will have to be incorporated into the model in order to determine EBITDA, free cash flow and costs.
  • Technology - This will, of course, play an important role in risk management. Banks will employ new technologies to help manage operational risk, credit risk as well as market risk. If the 2007 crisis is any indication of things to come, a lot of hard work will have to be put into the management of credit and operational risks, employing new technologies to monitor banking operations, review data and reconfigure risk models.

Talent insight

For now and for a long time to come, talented risk managers and professionals are what banks will continually need - people with the right set of skills and experience. Unfortunately, the talent pool of risk managers has not been expanding in line with the new demand.

Over the past decade as regulatory demands were on the rise, becoming increasingly more complex, no meaningful efforts were made to attract more talented people into the field of risk management. This has led to a shortage of skilled risk managers even before the emergence of the pandemic. Given the urgency of our current climate banks will not have the time to train people and will need to recruit. This is where we come in, if you're a professional within risk, please get in touch now.

16/10/20
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2020 has been an unexpected year across the world, and it has been crucial to monitor and deal with all the effects of the Covid pandemic in business and in our personal lives. Amidst this crisis we have also had the uncertainty surrounding Brexit looming over us, which has left many businesses trying to deal with the immediate challenges to society and the economy at large. The effects of both have been felt, and we can see this within the jobs market.   As experts within specialist markets we have been privy to fluctuations within specific industries. Below are some of our observations across the market.Custom and duties tax specialists We have seen an increase in activity and growth across custom and duties tax specialists for large import/export FTSE businesses. Particularly businesses are looking for candidates on an interim basis to make sure effective processes and controls are implemented. This is an evolving space and once we have further clarity we expect demand to increase. In the last 6 months, we’ve seen an increase in recruitment activity from businesses in industries such as food manufacturing and FMCG that have had an increased demand for their products on the back of lockdown. In addition to this, businesses that do a significant amount of importing and exporting see customs and duty as a key area of focus with Brexit looming, and we have advised and recruited for several clients who have required specialist knowledge. This is a niche skill set that can be provided at premium rates by consultancy firms, but there is a recent trend to bring this expertise in house. The cost of doing this would be in the region of £40-50k for a perm hire and c£250 per day for a temp hire - watch this space if you're a candidate within this market.  Audit and riskAudit and risk have also experienced an increase in resource on both the temporary and permanent markets. As organisations seek to learn effectiveness lessons from the crisis they require resource to conduct and undertake Covid specific reviews. In addition, the offering of flexible working arrangements also provides a great opportunity to test network capabilities as well as controls across user access, disaster recovery, business continuity, as well as high level IT controls testing to ensure remote working does not compromise the risk appetite of the business. Start ups Over the past 6-12 months we have also undertaken a number of start up engagements, helping businesses recruit permanent heads of department to develop strategy internally. This is a trend we expect to continue as businesses look to cut spend on consultancy fees and take ownership of these disciplines, ensuring a consistent level of quality and cost efficiency.  To view more of our live roles, visit our job search page.

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Amidst this crisis we have also had the uncertainty surrounding Brexit looming over us, which has left many businesses trying to deal with the immediate challenges to society and the economy at large.

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Summary: Senior Managers and Certification Regime Rules 2018/19

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Marks Sattin's Compliance and Financial Crime Recruitment Manager, recently put together a summary of the FCA near final Senior Managers & Certification Regime rules published on the 4th July 2018. This extensive document is over 400 pages long and describes the key areas of change to be implemented over the next year and a half, with the deadline being 9 December 2019.  The key areas of change: Senior Managers Regime The Senior Managers functions remain the same for the FCA only (not PRA), with the exception of: • SMF18 (Other Overall Responsibility) • SMF7 (Group Entity Senior Manager) • SMF27 (Partner) The functions have been further clarified in their handbook. Certification Regime The FCA have not made any further amendments to the Significant Harm Functions for the FCA, only authorised firms. “Opt up” to an Enhanced Firm Because of the large number of holding groups who have multiple legal entities and companies, the FCA have introduced a process for them to “opt up” on a voluntary basis to become an Enhanced Firm. Even though individually they do not meet the criteria for being an Enhanced Firm, this change will give them the opportunity to be recognised as one. A new FCA Register Currently the register only contains information on Senior Managers and no information on Certified Persons under the Certification Regime. Download the full summary here.

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A summary of the FCA near final Senior Managers & Certification Regime rules published on the 4th July 2018.

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As a sizeable, and growing, portion of the financial services sector - risk and compliance plays a vital role in ensuring that firms conduct business safely, sensibly and in a way that complies with the slew of financial regulations in the market. As one of the top financial sectors in the world, the UK contributed £119bn to the British economy last year (50% of which came from London), and growth shows no sign of stopping anytime soon. British financial firms handle huge amounts of money and sensitive information every day, and having a strong risk and compliance team is essential for those who want to navigate pitfalls smoothly, grow their business and of course avoid sparking another financial crisis. However, the changing market is also ushering in a new wave of regulations, challenges and opportunities for the sector. With huge advances in technology changing the way in which we work, live and do business, more and more organisations are making the switch to the digital economy, employing new platforms, new software and new methods of making and exchanging money faster and more efficiently than ever before. As a result, the industry is having to adapt to doing business with tools that still aren’t fully regulated, but this represents opportunity as much as danger. With new technologies springing to the forefront that could actually make risk and compliance safer than ever before, the industry is in a state of flux. Here are some of the biggest changes on the way: Blockchain Since first being developed in 2008, blockchain has become a hugely popular way for the heavily-regulated banks to transfer currency in a transparent, efficient and reliable way. Currently, each firm keeps its own records of financial transactions on a ledger that it then reports to regulatory authorities; inevitably, this leads to complications and a lack of transparency. Blockchain is revolutionising this, through the very way in which it is constructed. It is an automatic, online ledger where the industry and regulators can both access transaction records, and where all transactions are locked into a ‘link’ which is impossible to tamper with. As a result, regulatory authorities can easily access all of the information they need, creating an inter-operable environment where risk is reduced, as well as the threat of fraud. Though it would require financial institutions to accept a decentralised method of control, blockchain holds great promise as a form of technology that can offer a safer, smarter way of financial innovation, which is also automatically compliant. RegTech The UK is currently somewhat of a RegTech hotbed, thanks to generous investment from the government, and RegTech is helping to pioneer a simpler way for financial companies to remain compliant and low risk. With new changes like MiFID II and GDPR, around 250 regulatory changes take place every day: RegTech companies aim to solve this by creating a simplified system that’s optimised to help firms and institutions comply with all the new regulations being ushered into law. With numerous RegTech firms specialising in different areas of the market, from Tax Management to Financial Services, the software that they create uses machine learning and AI to extensively map the relevant data and offer both banks and FinTech companies solutions that are tailored to them, which will, in turn, enable them to conduct business in a more compliant way. Though it’s currently in the starting blocks, there’s been a surge in demand for talented programmers and developers in this area, and a recent survey by Thomson Reuters Regulatory Intelligence stated that 75% of respondents had a positive view of RegTech, so it will likely become much more popular over the coming years. Making payments The payment revolution has well and truly landed. With apps like ApplePay and Google Wallet making it easy for people to pay with a wave of their smartphone, new developments like fingerprint scanners and voice and facial recognition is paving the way for an upheaval in consumer authentication. It will even make transactions more secure, thanks to the fact that the vendor never receives a customer’s credit card details. Might we soon be able to pay for things with just our fingerprints? These developments are going a long way to tackling credit card fraud, but also raise a whole host of new issues. Cryptocurrencies, mobile payment services and B2B, are all subject to domestic rules and regulations, but due to their rapid spread, many still remain unregulated. Though efforts are being made to tackle this, keeping up with this will likely be a major concern for risk and compliance companies over the coming years. Cybercrime What bigger risk is there to financial firms than cybercrime? 86% of financial services companies across the UK, US and Europe plan to spend more money on it, which is unsurprising, especially given that the financial sector is one of the most affected by it in the economy. With new ways to process money and data have come new ways to steal it, and tackling this surge in online crime is becoming an increasingly important component of any Risk and Compliance team. However, AI and machine learning are already taking steps to tackling this: by using algorithms to detect anomalous patterns and predict outcomes, AI’s self-learning abilities make it a great tool for detecting threats, and businesses across the UK are being encouraged to adopt it to reduce risk to their business. There’s no doubt that technology will become an important part of any risk and compliance team’s arsenal in the next few years: now, the emphasis will be on these teams to update their software to keep pace with the changing market. Get ready for the future with Marks Sattin At Marks Sattin, we take pride in connecting the brightest minds in the financial services industry to the best jobs. Find out more about what we do; or browse our blog for more insights. Alternately, if you feel inspired, why not take the next step in your career with our selection of vacancies in Risk and Compliance?

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As a sizeable, and growing, portion of the financial services sector - risk and compliance plays a vital role in ensuring that firms conduct business safely, sensibly and in a way that complies with the slew of financial regulations in the market.

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