A swift and effective response to a consent order is critical to demonstrating your firm's commitment to complying with regulatory standards. Building a team that ensures all relevant stakeholders are involved and informed, creating a detailed and comprehensive compliance remediation plan, and properly monitoring and controlling the progress of the remediation are key to effectively remediating compliance gaps. Executing a remediation with awareness and intentionality will further demonstrate to regulators that your team is capable of managing the regulatory compliance risks presented by your firm.
Build Your Internal Remediation Team
The remediation team will ultimately be responsible for managing and/or executing day-to-day activities related to the remediation plan. This team will also be responsible for tracking and reporting progress of the remediation to both internal and external stakeholders, such as the Board of Directors and regulators.
- Designate a Remediation Lead: Appoint a senior-level individual to lead the remediation. This person should have authority, visibility, access to necessary resources, and the ability to manage cross-functional teams. This person is responsible for ensuring that stakeholders clearly understand the remediation requirements and tasks. They will directly oversee the tracking and reporting of remediation progress and efforts.
- Form a Remediation Working Group: This group should be chaired by the remediation lead, and should include representatives from affected departments (e.g., compliance, IT, operations), key project managers, and relevant subject-matter experts (SMEs). The group will execute the compliance remediation plan and facilitate ongoing communication and alignment. This group should hold frequent and regular meetings to discuss the plan's progress, emerging issues and risks, and the cost and resource needs of remediation tasks.
- Establish Governance Committees: Set up governance structures to oversee the remediation process and validate that compliance gaps are comprehensively addressed. This often includes a remediation oversight committee of the board of directors made up of senior leadership and audit representatives (to facilitate Board-level oversight over the remediation progress) and a remediation validation committee including the remediation lead and a representative from audit (to validate actions taken to complete remediation tasks).
- Identify External Advisors and Third-Party Support: Consider engaging an external third party to provide advisory services or to directly assist with remediation efforts. If a third party is required by the regulatory enforcement action, ensure that the firm chosen is sufficiently vetted and, if required, receives regulatory approval.
Create a Remediation Action Plan
Creating a comprehensive remediation action plan will help direct and organize your remediation efforts. The remediation working group should regularly revisit the action plan to discuss any issues and make necessary adjustments as the plan is being executed. Below are recommended steps to create an effective plan:
- Define Remediation Requirements: Identify high-level requirements specified in the consent order. Then, delegate each requirement to an SME owner.
- Create Actionable Tasks: Work with SMEs to break down each requirement into discrete, actionable tasks. SMEs should define the work effort, resource needs, and cost associated with completing each task.
- Identify Resources: Ensure that you have sufficient resources with the required skills and expertise to complete all defined tasks. Identify where an external third party is required or better positioned to assist in the completion of tasks, taking into consideration the operational impact and resource constraints the remediation plan may have on business-as-usual controls, processes, and operations.
- Define Budget: Discuss a budget with senior management and/or the board. The budget should align with the anticipated cost of completing all remediation tasks and should include elements of known costs as well as contingency funds to address unexpected costs arising from emerging issues and risks.
- Prioritize Tasks: Prioritize all work items to ensure compliance with the consent order and its outcomes, ensuring that the deadlines specified in the consent order are met. Define dependencies between tasks to effectively prioritize work items.
- Create a Realistic Timeline: Define start and end dates for all tasks considering their priority, work effort, dependencies, resource needs, and cost. Ensure your plan includes milestones and contingency measures.
- Present Remediation Action Plan: Present the remediation action plan to the applicable board committee. Discuss the steps, contingencies, constraints, and risks for the plan along with the resourcing and budget implications of the tasks. If necessary, share the remediation action plan with regulatory authorities or independent compliance monitors for awareness and/or comment to ensure that the action plan is aligned with regulatory obligations.
Apply Proper Governance and Controls
There will likely be issues and risks that emerge during the course of the remediation. Effectively monitoring remediation efforts and addressing issues will demonstrate your team's ability to continue managing compliance risks even after the remediation is complete. To apply appropriate control, the following is recommended:
- Clearly Delegate Responsibilities: Delegate responsibility for each remediation task to members of the remediation working group. Define responsibilities for completing and approving each task, along with individuals who should be consulted and informed regarding the task. Consider using a RACI matrix, a DACI matrix, or a RAPID framework to ensure that these roles are clearly defined.
- Document and Validate Work Performed: Actions taken to complete each remediation task should be clearly documented to support that compliance risks have been mitigated. Create a process to clearly document all work performed related to each task, including evidence to support its completion. As tasks are completed, an independent remediation validation committee should review all documentation to ensure that the documentation is fully auditable, that actions taken were appropriate, and that there are no outstanding compliance gaps. Members of the remediation validation committee should be fully independent and should never validate remediation tasks that they were involved in completing.
- Report Consistently: Consistently report the progress of the remediation to regulatory stakeholders and the remediation oversight committee. Ensure that these reports are formatted consistently, illustrate management actions and remediation efforts, and highlight issues with the appropriate level of detail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
