44 / 72
Markets and Securities Services |
United Kingdom
42
Ensuring senior managers fulfil their
responsibilities
The starting point for senior managers is to
be clear about what they are responsible for
and that this corresponds with what happens
in practice. But governance is not just about
individuals: it is also about how the members
and different parts of the governance structure
operate together.
Governance membership at boards and
committees further down the organisation will
differ depending on the types of discussion
(e.g. detailed or strategic) and the issues being
decided. Whether a particular forum contains
the relevant business lines (e.g. operations,
risk, compliance, human resources) should be
part of senior managers’ considerations when
delegating tasks to other committees.
Reporting and escalation routes need to be
clear so senior managers are kept appropriately
informed of important changes, decisions and
issues. A complex or convoluted governance
structure can lead to issues not getting
escalated to the right place, or not being
escalated quickly enough up the chain to allow
fast and effective decision-making.
An important aspect of reporting is the
quality of information provided to boards or
committees. The scope and level of detail of
the information provided should allow those
present to understand, check and challenge it.
This may involve summarising data and trends
and presenting them in a digestible format.
Providing all possible information is often
counterproductive for effective governance as
the volume makes it unlikely that it will be read
or appropriately scrutinised. One compliance
officer made the following observation:
effective reporting is providing information,
not data. Keeping this in mind can improve the
quality of reporting so senior managers are
better informed.
Relying on subordinates to make the
right decisions
Governance provides a framework for decision-
making, delegation and reporting. Even with
the best reporting, senior managers cannot
oversee everything all the time. Senior
managers must delegate tasks appropriately
to the right people, and culture can influence
those individuals to make the right decisions,
delivering the outcomes customers expect.
Asset management is the business of trust,
and the reputational risk from a poor culture
should not be underestimated.
Assessing and changing culture are difficult
tasks, particularly from within a company.
Culture must be inferred from many
observations of how firms and different
individuals make judgements. What was
considered, what was discounted, what tipped
the balance of decisions?
Effective discussions and decision-making
need the right people in the right place at
the right time with the right information.
The composition of the governance bodies is
important to make sure decisions are rigorously
tested. Appropriate membership ensures that
relevant input is provided and decisions are
based on a diversity of views. At board level,
non-executive directors can provide a useful
perspective, independent of the business.
It is important that the members of a forum
contribute to make sure the important
questions are asked and answers are tested.
Skills and experience need to be appropriate
to the responsibilities placed on the individual,
and should be reviewed for current members
and when planning for succession. In identifying
potential successors, firms should also bring
more diverse experience and backgrounds
onto boards to drive the best possible decision-
making at the top of the business.
The SM&CR
provides an
opportunity to take
the time to carefully
review how your
business makes
decisions, oversees
delegation and
drives behaviours.