It’s always better to be as proactive as possible regarding regulatory compliance, but staying ahead of the curve and planning ahead is difficult to do while running multiple programs and conducting business as usual. Luckily, there are trends in regulation policy, and one you can safely bet on is sustainability as a massive influence. Indeed, the push to make the financial industry a key enabler, even an accelerator – to realise a sustainable world is powerful and shows no sign of slowing down. When a trend has such momentum, it requires some special attention, that is, if you’d like to be in a proactive position in your compliance efforts and not a reactionary, stressed one.
Is there an easier way to gain control over sustainability and risk management in the context of regulatory change?
We say yes. It’s all about immersive integration, and you can do it in 5 easy steps (not necessarily in this order).
But first: What do we mean by immersive integration?
We mean that sustainability concerns need to be a part of each and every step of your regulatory change framework. Sustainability themes naturally seep into each step anyways, explicitly addressing the integration to each of the elements of the framework is key.
Integration Step 1: Vision
This is the most essential step, and unfortunately, the one that we see not given the attention that it needs or – very regrettably – skipped altogether. This step is about determining your business’s current values and determining its vision regarding compliance to sustainability regulation moving forward. What is your corporate purpose regarding sustainability? To what extent is this purpose aligned with the sustainability regulation both known and in the future? How does it align with the clients you take on and the risks you take? Businesses that have a strong moral sense of themselves now and where they want to go have a much easier time with the rest of the steps because they have an eternal guide, a solid foundation to align to.
Now that you know who you are and where you want to be, the rest is easy. Doing your homework pays off.
Integration Step 2: Assessing Change Appetite
With your vision clear and in tow, set your appetite. Appetite in terms of the speed and the extent to which you want to be ‘ahead of the pack’, which methodologies and building structural solutions will be needed. Some things are easy to realise with hard numbers and relative little effort, other requirements – specifically related to the quantification of sustainability risk – requires a little more finesse; you need to find ways sometimes that are a bit abstract to articulate it and, of course, be able to prove and present it to authorities and other oversight entities. Do your new visions change your risk attitude or that of your stakeholders? These are things you need to decide.
Integration Step 3: Assigning Responsibility
You have your vision and your appetite ready to go; now it’s time to decide who will be making it all happen. You can go many routes, and the path you chose should play to your company’s strengths. Which functions are responsible for upholding these values? Will you create a separate line that will be responsible for maintaining these initiatives? Who will be in charge of creating and implementing reporting pathways – both formal and informal? Are all these clearly stated and documented? What you choose now will say a lot about how high sustainability is on your priority list as a business, so make sure you’re aligning well with your vision.
Integration Step 4: Building Capabilities
You know what you want to do and who will do it; now you need to make sure you can indeed pull it off. What do you need now in terms of people and systems? Do you already have it? If you changed nothing, could it work? There is a massive demand for people with sustainable risk management experience; how can you make sure you can hire them? Is it easier to train one of your own people on the subject instead? How can you invest in this highly sought-after profile? The bottom line is – you need to make sure you have both the people and the operational capabilities to make your vision a working reality.
Integration Step 5: Determining Material Standards
What KPI’s translate to practical applications? Setting the targets and metrics is critical – but it’s also a struggle; you need to look at it from the regulators’ perspective and determine how to translate that into working models. You need to see which sustainability factors will be the most important and impactful to your business. Is it flooding? Global warming? Global Emissions? Again, looking back to your vision will help determine the answers to these questions as well.
As you can see, taking your time with creating your vision is vital to making sustainability a priority. It helps you by acting as a moral compass, which leads to time saved, and helps you avoid re-dos or operating conflicting programs. And the whole thing works best when it’s fully trans-department in its orchestration and coordination.
At ACE, we are passionate about sustainability and help our clients by guiding and prompting them through these steps while providing experts’ support to help you create a sustainability program that becomes a part of your business’s DNA.
If you’d like to learn more about how we help businesses future-proof their policies, so they have more control, get in touch.
As always, thanks for reading,
TEAM ACE