Diving in to Compliance

Entering the waterMy weekends are spent reviewing overarching risk assessments and analysing specific risk assessments as well as undertaking the compliance review of policies and procedures, finishing with the review of performance of the systems and controls.  I am not taking work home with me nor am I moon-lighting or taking on further roles, I am though a qualified Diver and a qualified Solo Diver.

Diving can be a high risk pursuit and can lead to death even at shallow depths. My joy and passion is to go deep, exploring wrecks and reefs of the Channel Islands below 30 meters or 100ft and seeing the beauty and fragility of the alien world below illuminated in beautiful colours with its abundance of life.  The chance of swimming to the surface and surviving without any injury after a total gear failure or panic attack are slim at best, at these depths. The choices I make are calculated and risks are mitigated using similar principles that a Financial Services Business (“FSB”) would utilise.

I start every dive season off with an overarching risk assessment, looking at the risk I am prepared to take, what I want to achieve and the factors affect me. This is not overly different to the Anti-Money Laundering and Combatting Terrorist Financing (“AML/CTF”) Business Risk Assessment for any FSB in Guernsey.  My overarching risk assessment is where I look at what I want to achieve and the risks that I am prepared to take in essence what my risk appetite is, and it does vary year to year.

For a FSB the AML/CTF Business Risk Assessment looks at the risks posed by its products and services and its customers. In my case these translate to the types of diving I want to engage in, my planning and who I dive with.  My mitigation of the risks faced would be my diving gear and its set up and my overall health to make the dive.

I then put into action a monitoring programme taking into account my overarching risk assessment.  A full review of my diving gear is essential as is my fitness, this will involve servicing both gear, body and mind and reviewing them on a periodic basis.  This is similar to the provision of management information to the Directors of a FSB. They require to know the state of health of their policies, procedures, systems and controls, to ensure that they are maintained and remain in good condition and fit for purpose in order to mitigate the risks their business face. Knowing that my gear is in good condition and works is essential for whatever dive I do while the health of my body and mind will dictate the dive that can be undertaken safely. Resources must be put to where areas of concern are noted to ensure that the potential for errors or incidents are reduced to a minimum.

drift drivingThen it all comes down to the day, where I undertake a specific risk assessment of myself, the conditions, the type of dive to be undertaken and who I am diving with or if I am going solo. In a sense this is similar to the customer risk assessment that FSB’s undertake for each customer, in order to identify the risk they pose to the FSB and whether the risks are acceptable.

FSB’s by appreciating the risk posed and faced by the customer can decide whether they are prepared to engage in a business relationship with a customer.  In some cases when I have dived I have been satisfied with the risk I face and have dived but I have also be known to decide that the risks are too high or that my systems and controls are not up to the task and have declined the dive or undertaken an easier dive.  I always work on the idea that it is better to be on the surface wishing you were diving then being in trouble under the water away from help and wishing you were on the surface.

Due to the higher risks I take my systems and controls are tailored to me and include as a minimum two independent air cylinders.  I implement my systems and controls by dividing my body in to two halves, one side has computers connected to one cylinder and the other side has old-fashioned gauges connect to my other cylinder, the idea being that should one side fail I can rely on the other as back up.  It also means I can monitor the performance of my systems and controls effectively ensuring that any false readings or dangerous situations are detected early and evasive action taken.

The last thing I do after every dive is to review my systems and controls obtaining data from my computers, analysing this to ensure my policies and procedures remain fit for purpose.  I then assess my overarching risk assessment making changes if required. This has similarities to the quarterly and annual reviews that are done by management and Directors of a FSB to ensure that their businesses are meeting the regulatory framework and mitigating the risks that they face, in essence it’s just good corporate governance.

Diver OKThings do go wrong and no matter how good your policies, procedures, systems and controls are.  I have been in situations where I have had to shut down one side of my systems and controls due to sudden failure of a hose or regulator as well as having to rely on my old-fashioned gauges, watch and mental arithmetic when my computer has failed. It does not come down to luck that I am here writing this but that my risk assessments and planning have taken these situations into account.  My compliance monitoring has reduced these incidents and malfunctions to a minimum and I have put resources to the risks I face ensuring I am suitable trained and able to deal with incidents of this nature.

FSB’s that have a good corporate governance culture, a suitable compliance framework and a compliance monitoring programme that meets their needs and provides the required management information effectively, have in general survived the financial crisis and have adapted to business and regulatory changes with ease.  Where issues have surfaced they have been able to deal with them effectively and/or report at the earliest opportunity where required to the regulatory authorities or Financial Intelligence Unit.

(Pictures by kind permission of Colin Peters)

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