FourthLine's Director of Talent Services, Dan Waltham discusses 8 essential areas companies should recruit for now in order to ensure future effective risk and regulation management.
1. Model Risk / Model Validation specialists
The use of software-based models and decision making has grown hugely in the last decade through advances in technology. However, selecting the right inputs for your model is still open to human error. A model generally only acts on assumptions devised by a Chief Investment Officer and then added by a programmer.
Model Risk is the risk that emerges when your predictive model is poorly devised or contains inaccuracies that can lead to financial losses or insecurity for your business and your customers. There are high profile examples where incorrect modelling has led to billion-dollar losses or even collapse.
As your reliance on technology-based modelling and decision making grows, so does the importance of Model Risk experts or Model Validation specialists. They will ensure that you have the correct controls and governance in place to mitigate against errors and allow you to react quickly to inaccuracies, preventing significant financial losses.
2.Third Party Risk Management specialists
ISACA defines third party risk management as “the process of analysing and controlling risks presented to your company, your data, your operations and your finances by parties OTHER than your own company”.
Investing to prevent cyber risk and data breaches is now the norm for most companies. Placing equal importance on the security of the supply chain and third-party products is often a secondary consideration. Many recent cyber-attacks and data breaches have been as a result of back door access via a third-party application.
If your information security programme or data protection agenda does not include provision for a third-party risk specialist, then you are leaving your business at significant risk of a breach. The third-party risk specialist creates and embeds an operating model and a suite of policies, processes and controls that manage risk from your suppliers.
3. Chief Data Officer
Data strategy is a central component of modern business. Every company of scale uses data as an asset. Data is used every day to drive and support decision making, identify investment and growth opportunities and as a tool to attract and win new customers.
Employing someone to lead and own your data strategy is the only way that you can take advantage of the information at your fingertips. The Chief Data Officer (CDO) is the executive-level owner of your data strategy. They lead multi-discipline teams, harnessing the power of machine learning, AI and Analytics to unlock the value of your data.
The role also plays an important part in your data governance agenda. A CDO works closely with the Data Protection Officer or Chief Privacy Officer to ensure that regulatory considerations and ethics is a core design component of any data strategy.
4. Chief Privacy Officer / Data Protection Officer
In modern business, the importance of data in decision making and its central role in sales and marketing means that most businesses process data in some way. The introduction of GDPR focused minds on the importance of data protection. The regulation requires you to appoint a Data Protection Officer who acts as an independent expert, the regulator’s “inside man” in your business.
Today’s consumers are demanding when it comes to data protection. The appointment of a DPO not only ensures that you comply with GDPR but shows that data integrity and data ethics are both priorities for your organisation.
The Data Protection Officer creates a framework of policies and processes to protect your customer’s data and is also a commercial executive helping you to design services and products with data protection at their heart.
5. CASS / Client Money Specialists
The FCA’s focus on the Peer 2 Peer space has prompted these firms to move Client Money management out of their Finance team. This migration of CASS oversight has created a line between operations and compliance.
Firms without a CASS Oversight team should consider bringing in a CASS Oversight Manager capable of building out a team and providing CASS assurance and expertise. Firms in the buy-side transitioning to the SMCR model should consider bringing in a Head of CASS/Deputy SMF to assist with the CASS Oversight.
CASS specialists will help your business to develop and implement more robust strategies to manage client money and keep you in line CASS rules. They should help you to create policies and work with the regulator to ensure compliance and offer regulatory guidance when making investment decisions.
6. Head of Financial Crime / Money Laundering Reporting Officer
The UK government’s Economic Crime Plan 2019-22 and the imminent introduction of the Fifth Money Laundering Directive (5MLD) shows that financial crime is high on the agenda for UK business. There is nervousness that new financial market entrants, such as FinTechs, are particularly exposed to financial crime.
Your willingness to prioritise financial crime management and set the tone from the top is vital. It’s your commitment to self-improvement strategies that help you identify, report and investigate suspicious activity.
A Head of Financial Crime ensures that your company uses data insights and ditches silos to bring a holistic approach to the topic. They will create forward looking controls, implement strong reporting and monitoring processes and use technology to support a robust regime.
7. Banking and Finance Lawyers
A quality in-house banking lawyer helps your firm in a range of areas, including general corporate banking, finance (borrowing, real estate, structured and derivatives) and debt. Recent changes to regulation have brought this need for legal expertise into sharp focus. The FCA’s announcement to scrap the LIBOR rate in 2021 has been a concern for many companies.
As of mid-2018 there was still over $400 trillion pinned to the rate across various financial products, highlighting the extent of the exposure globally. The FCA has mandated companies to find alternative Risk-Free Rates (RFRs) and this requires you to draw on the best technical and legal talent.
Implementing these changes to avoid contractual force majeure is one that requires multiple areas of junior and senior legal talent. From SME structured products lawyers who advise on how the changes in rates affect derivatives contracts to those carrying out the necessary leg work of re-papering. Automation helps but without legal due diligence, it becomes difficult to ensure that IBOR transition will be delivered compliantly.
8. Chief Information Security Officer
Information and Cyber Security are high growth careers with a projected 30% increase in jobs over the next 5 years. Cyber-crime impacts the corporate world to such an extent that cyber risk is widely regarded as the most significant risk to business.
Sophisticated hacking strategies and complex malware and spying software make protecting your company assets a daily priority. That’s where the CISO comes in.
The CISO is the leader of your company’s security strategy and sets the vision for your Information and Cyber Security agenda. The CISO will bring a blend of technical expertise and people leadership and should be a key member of your executive team.
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