T&C: WHERE COMPLIANCE AND HR COLLIDE OR COLLABORATE?

Training and competence is a unique element of the financial services compliance landscape, in terms of both perception and technology. Responsibility for it spans different departments, crossing the divide between HR and Compliance, writes Neil Herbert, director, HRComply.

At a recent training and competence (T&C) conference, a staff member from the Human Resources department of a well-known financial services firm turned up (unexpectedly, at least for the Compliance staff members that were present from the same firm). A compliance executive asked the HR executive why she was in attendance, to which she replied: “The conference is about training and competence, isn’t it?” The compliance executive said “Yes, but you are from HR?”

This is a not an uncharacteristic reflection of the relationship between Compliance and HR within financial services firms. Those who work on training and competence programmes will rarely describe themselves as HR professionals, the vast majority citing ‘compliance’ or ‘T&C’ staff.

A unique element of the compliance landscape

Training and competence is a unique element of the financial services compliance landscape, in terms of both perception and technology. Responsibility for it spans different departments in different firms. In this way it crosses the divide between HR and Compliance in a manner unlike any other regulatory task. Consequently, there is often an overlap (or disconnect) between the various technology systems that are run by each of the departments that have an involvement in training and competence.

The FCA’s new focus is firmly on conduct and ethics – as evidenced through the prevailing culture of any regulated financial services firm. The FCA has clearly signalled that senior management will increasingly be held accountable for these areas – but who is actually responsible for steering the training and competence programme within an organisation?

The obvious answer is often Compliance, but what about the HR department?

Effective training and competence within a firm is evidenced by its market and client behaviours. This involves: staff adherence to benchmark standards of quality and suitability of advice, conduct and ethics; standards of delivery maintained through the training, development and assessment of staff; and the effective management of staff performance in these areas. Many would argue that these are areas that naturally fall within the remit of any proactive Human Resources department – not Compliance.

An uneasy relationship

In reality it probably falls somewhere between the two. And yet in so many companies we deal with, we see HR and Compliance operating in completely separate silos, with T&C practice and process often roughly carved up between the two. More than often there is little collaboration between the two departments on these issues and they are seldom working towards a common goal.

Indeed, at the offices of many of our clients, we see an uneasy relationship between the two teams. Much of this results from a lack of understanding of the areas where the two disciplines can complement each other and work together. Many HR professionals need to become more familiar with these areas and recognise that a cooperative, supportive relationship with Compliance is not only essential in managing the firm’s people and compliance risks and exposures but also often affords HR a greater opportunity to exert influence in key cultural and risk areas.

The shift to compliance outputs

The old FSA’s focus was largely on the shortcomings in corporate governance and oversight that the financial crisis so clearly exposed. It was all about implementing process and policy – in other words, ticking boxes.

The FCA is taking these ‘inputs’ as more of a given and is looking more closely at the outcomes – behaviour and culture in firms. The shift from inputs to outputs has many implications; however, surely the training and competence in any firm must be significantly influenced by its HR function and policies – not just the Compliance team?

In the area of training and competence, HR needs to work with Compliance to define what a ‘good standard’ looks like. It then must deliver the requisite training, while issuing clear guidelines and expectations through policy and process.

Assessment of adherence is critical. Assessment should be woven into the daily fabric of the business, not just in the annual appraisal. Benchmarks should be clear and measurable. Shortfalls or risks should be identified and dealt with promptly through firm remediation actions.

The message is clear: T&C is a shared activity for both HR and Compliance.