Navigating the FAR: Five priority actions

Australia's financial services industry is encountering a surge of new regulations and heightened oversight from regulators. The Financial Accountability Regime or FAR is one example and while it could be seen as a regulatory box-ticking exercise, how you approach the FAR could define a long-lasting approach that can significantly accelerate your response to other upcoming regulations.  

A narrow perspective can result in unnecessary restarts, higher costs, and a lack of cohesion with other transformation efforts. It's crucial to look beyond the FAR, adopting solutions that not only comply with current regulatory demands but also prepare you to respond effectively to future challenges. This involves integrating risk management deeply into your organisation and ensuring your processes, controls, and frameworks are future-proof.

So, where do you begin? After consulting with industry leaders and drawing on our experience in risk and regulatory compliance, we've identified these five priority actions for you to take:

1. Don’t get distracted by others and focus on your firm

When it comes to risk and regulation, each firm is unique; what works for one may not be suitable for another. It's tempting to observe competitors and consider adopting similar strategies, but generic approaches to regulation often fall short. This approach can divert attention from critical aspects of your firm's operations, processes, and policies, resulting in inefficient or delayed programs that fail to effectively manage regulatory risks. 

You need a proportional approach that looks at regulatory requirements and applies them in a way that reflects the size, complexity, and risk profile of your firm. Failing to right-size your approach to the FAR could lead to excessive time and budget spent on compliance.

So, whether it’s the FAR or another risk regulation, you need to tailor your compliance efforts to fit your unique needs and priorities.  

2. Identify what you need for the FAR and beyond

The requirements for Day 1 can significantly differ from what ongoing compliance may entail after the deadline. While there are actions you will need to take to meet the FAR compliance deadline, how you implement, manage, and monitor ongoing regulation will be crucial both on Day 1 and beyond. At a minimum, you should undertake a comprehensive gap assessment to see what you need to do to get FAR compliant. 

Start by first identifying what you need both for Day 1 compliance and for future readiness.  To do this, conduct a comprehensive assessment of your existing governance structures, accountability frameworks and risk management practices. Evaluate how well these align to the principles of the FAR. Identify any gaps or areas for improvement that need to be addressed to ensure compliance and enhance transparency. Ensure your accountable persons are prepared and aware of their obligations. 

Also consider what future regulatory developments may be in the pipeline and proactively plan. Engage stakeholders from across the organisation to gather perspectives on how to shape your preparation strategy. A proactive approach will help you not only to meet immediate compliance needs but also position your organisation for long term success in a rapidly evolving regulatory landscape. 

3. Establish a multidisciplinary team

Having a well-established, multi-disciplinary team is crucial for navigating the complexities of the FAR and brings the following benefits:

• Holistic compliance: The FAR requires a comprehensive understanding of compliance across various functions. A multi-disciplinary team ensures that legal, finance, risk and operational perspectives are integrated, facilitating a robust regulatory compliance framework.
• Diverse expertise: We know that different disciplines bring unique insights. Diversity helps identify blind spots and enhance decision making.
• Collaboration and communications: Diverse teams foster better communication and collaboration which is essential for implementing the FAR requirements. Communication helps break down silos in the organisation which is essential for promoting a culture of accountability. 

4. Prepare your organisation for cultural change

Firms that do the FAR well, will move away from a simple rules-based compliance, towards embedding the regime throughout the culture of the entire organisation. It’s important not to leave regulation implementation solely to the organisation’s leaders instead change needs to be embedded throughout the organisation. 

A few steps you can take to prepare your people include: 

• Ensure your teams know about the impending changes through training and development opportunities.
• Leaders should not only be endorsing the cultural change, but also demonstrating it through their actions.
• Enhance your governance structures and risk management frameworks to support compliance with FAR regulations.
• Conduct a culture assessment to identify existing values, behaviours and governance structures that may need stronger alignment to the FAR principles.

5. Don’t delay and start now

Firms should start planning for FAR implementation early on to ensure they have adequate time to integrate the necessary changes smoothly and effectively. This proactive approach will help identify and address potential challenges early, align processes with regulatory requirements, and ultimately minimise disruption to operations in the long-term.

Our experience from working with clients on implementing the Banking Executive Accountability Regime (BEAR) previously suggests that the effort and degree of preparedness should not be underestimated. 

If in any doubt, get an independent expert in to give you a view on how you are placed.

Make compliance your competitive differentiator

At Baringa, we see regulation as an opportunity; a chance to master your risk management. We help you define the proper scope and priorities for your FAR execution to get you ready for implementation and lay the foundation for beyond. 

We don’t believe in one-size-fits-all solutions. We act as an extension to your team embedding resilience at the core of your organisation to protect your biggest assets. And when we leave our capabilities stay because we upskill your people to build sustainable solutions faster, keeping you ready for the next wave of risk and regulation.

Get in touch to see how we can help you use compliance for long-term advantage.