In the second post in this series about little known but high value capabilities within StratexPoint, we will discuss the Stratex Timebox.
The Stratex Timebox is really two parts of StratexPoint which essentially capture a complete snapshot of your Governance, Risk and Compliance framework(s) at a given point in time, and enables customers to go ‘back in time’ to see the status of their GRC framework at that specific point in time.
This capability was originally developed to enable snapshots of the GRC framework to be taken before major changes were made; it has since evolved and now offers the opportunity to deliver significantly more value for firms and individuals included in the Senior Managers Regime (SMR).
Consider this scenario, the year is 2015 and you are the CEO of a UK retail bank and, having reviewed all your available management information and consulted within your firm’s management team, you have taken a decision to launch a new, highly innovative savings product. It is the first savings product of its kind in the UK market and, while your internal risk and compliance people provided a high level of challenge throughout the new product development process, and the Financial Conduct Authority (FCA) also provided challenges as various stages, ultimately all parties come to understand the risk appetite the firm had to innovate and bring this new savings product to market. They understand the risks associated with it and the controls implemented, and other steps taken to manage the risk within appetite, therefore all stakeholders provided their clearance to move forward with the launch of the product.
However, given the innovative nature of the savings product and the fact that it is the first of its kind in the UK market, ultimately the decision to launch it was escalated to the Bank’s executive board and specifically to you as CEO of the bank. The Go/No Go decision for this product launch ultimately is yours and yours alone.
You take the decision to launch and with initial success the marketing campaign goes into overdrive and over the next few years your bank’s market share increases dramatically and you watch as your competitors struggle to launch competitive solutions, and only manage to do so months or years later.
You are lorded as the CEO who disrupted the UK retail banking market, with regular appearances on the front cover of leading magazines and newspapers, you are a regular speaker at conferences, visitor to No. 10 and the White house to talk about Financial Services innovation and providing banking to the poor and excluded in society.
Within a short few years, you find yourself on one knee in front of her majesty the queen, receiving your knighthood for services to Financial Services industry and the community. Your proudest day, your wife and children look on full of pride.
As is always the case, over time there is a change of government, change of public sentiment and changes to financial services regulation.
Only a few short years later there is a knock on your door, the FCA are waiting with the support of the police. It turns out that the fees built into the innovative savings product that you launched as CEO of a retail bank (which has long been brought be a larger foreign rival) is now regarded as not in the best interest of Joe Public and you find yourself at the heart of one of the biggest ever banking scandals to hit the industry. You are back on the front cover but this time for very different reasons. You are back on your knees, but this time it is not a gong being bestowed on you, but a set of handcuffs. Your darkest day, your wife and children look on full of fear.
Questioning starts, but rather than the authorities treating you with a presumption of innocence, under the Senior Managers Regime, yours starts with a presumption of guilt. Your charge – reckless misconduct in the management of a bank. You face a 10 stretch.
Your defence is that you took the decision to launch the now demonised savings product based on the best available management information. The management accountabilities within the firm were clearly defined and well understood so after due process the Go/No Go decision to launch the product had correctly escalated to the right level and ultimately person in the Bank i.e. the CEO; i.e. you. To make the decision you reviewed all available information related to the development of the product, the risk profile of the product and the compliance implication of the launch. You also considered the big picture objective of the business, the business plan you were tasked to deliver by the main board on behalf of all shareholders and you considered the risk appetite boundaries set by the main board in conjunction with the executive team. Additionally, you claim to have consulted widely and with the right people before taking the decision to launch the saving product.
But your challenge is simple: how can you evidence that you went through a proper process, had all the relevant management information to hand and consulted it correctly? This challenge is compounded when considering a number of years have passed since the product was developed and the decision to launch had been made.
Although this is probably the very worst case, it is exactly the type scenario where Stratex Timebox comes into its own. It provides the ability for the firm to ‘go back in time’ to not only access the management information as it was at the time of the decision, but also the accountabilities for business units, objectives, risks and controls can be accessed. This means that all stakeholders in the decision are available to view; who took the decision, who implemented the decision, who was consulted ahead of the decision and who was informed after the decision was made. Additionally, the escalation of the decision from within the firm to the right level is accessible, reflecting the managerial ‘Line of Sight’ in the business at the time.
Stratex Timebox can also be used as a vital tool throughout the staff changeover process to ensure that both leaving and newly employed Senior Managers can be certain that they have done everything in their power to exchange the most accurate information to ascertain the firm’s risk level at the time. Leavers can create a record of the handover documents for incoming senior managers and the known risks at the time they were employed/promoted to demonstrate that this information was available and also shared with them.
Coming back to the use case outlined, Stratex Timebox capabilities will provide the CEO with the ability and information to evidence that the decision to launch the new savings product was taken in a proper, considered way and in line with the best available information. The CEO could evidence that the decision was taken in line with the firm’s strategic objectives and within the risk appetite at the time. Additionally, our CEO will be able to demonstrate and evidence that at the time of the decision, he was deemed to be a ‘fit and proper’ person having demonstrated the appropriate values, competencies, attitude and behaviours for the role of CEO.
Within the emergence of the Senior Managers Regime (SMR), the little known Stratex Timebox capabilities will add value beyond that originally planned, effectively providing the ability for senior managers to take decisions and evidence that they did so in a proper way, based on a complete suite of appropriate level management information, having undertaken the correct level of consultation with stakeholders. This support for, and evidencing of, decisions is available whether the decision is challenged today, tomorrow, next year or in many years to come.
In an age of the SMR with its ‘Presumption of Responsibility’ and ‘Reasonable Steps Defence’, the Stratex Timebox has the potential to quite literally be a senior manager’s ‘get out of jail free’ card. Make sure you've got yours.
If you would like to discuss the capabilities of Stratex Time Box in more detail, do not hesitate to contact us!
Our third and final blog in this series on Stratex Benchmarking will be published shortly.