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Aggregate impact of regulation on the work of boards

Rising above the detail

Banking alert | 06 April 2016 | Aggregate impact of regulation on the work of boards

Boards face an increasing challenge to balance the time they spend dealing with regulation and thinking about business issues. This paper distils recent regulatory change into four key themes and sets out how to address these using existing tools and capabilities. Through a case study, it demonstrates how, when boards are faced with a relatively unfamiliar scenario, they can use the thematic approach to generate strategic questions that need to be answered to understand business and regulatory impacts.

Overview

The rapid re-regulation of the financial sector following the crisis has had a profound impact on financial services firms, and in particular for the board of directors. Boards need to deal with both regulatory issues and deliver shareholder value in an efficient and effective way.

This report defines four key themes through which board directors can critically assess regulatory impact whilst setting and reviewing business strategy. The report also includes a case study to illustrate how this framework can be applied in practice.

Aggregate impact of regulation on the work of boards

Key themes

The paper identifies the below four themes for boards to consider when setting and reviewing their strategy, making decisions and to provide the necessary stewardship for their organisation.

  • a forward looking view of risk and resilience enabling boards to build financial and business resilience and manage tail events when they crystallise;
  • incorporating customer outcomes and the wider public interest into the details of decision making rather than just profitability;
  • establishing the right culture in the firm by building risk awareness and effectively using the five enablers discussed in this paper; and
  • maintaining a legal entity view of governance and resilience and striking the right balance between independence and cohesion with the rest of the group.

These themes are considered alongside the tools and capabilities available to boards, providing a framework that boards can use to approach regulatory challenges, particularly when addressing a business area where they lack expertise or familiarity.

Aggregate impact of regulation on the work of boards

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