What does a Financial Accountability Regime (FAR) Operating Model look like?
As organisations address the initial need to comply with APRA’s Financial Accountability Regime (FAR) requirements, consideration turns to the inevitable question – what now? In our discussions with clients, a common theme that emerges revolves around how to organise and resource the ‘Office of the FAR’. As with most things related to FAR, there isn’t a straightforward answer, but we share our point of view in this blog for organisations considering how to embed and sustain the financial accountability regime in their business.
What is an ‘Office of the FAR’?
As we covered in our last blog, the increased scrutiny brought about by the FAR requirements means that financial services organisations are required to invest time and effort into complying with the regime. Once the initial flurry of activity to set things up settles down, which in itself can be a significant effort, the broader question of what to do with FAR emerges. Not only do organisations have to demonstrate that they are taking ‘reasonable steps’ to comply with FAR, but for the organisation wanting to use it to drive organisational performance, doing more than ‘ticking the box’ may be required.
Where to start?
An Office of the FAR, or whatever the organisation chooses to call it, needs to be designed and established in the same way any new business function should be – by starting with what it’s going to do (its function) rather than its form (who sits where).
Levant advises that any client setting up an organisational function should start with defining the VALUE of the function first. Setting up an Office of the FAR is no different – we suggest starting with a value chain for FAR.
Once the value chain is articulated with associated outcomes and performance expectations, you’re in a position to start figuring out who should take responsibility for those outcomes, and which organisational units will be involved in some way to support. Depending on your organisation, this can be existing, or newly created, organisational units.
How many people will we need in the Office?
Head of the FAR, The FAR Enforcer, Principal Investigator . . . two people or 20 . . . How big is this team going to be? This is dependent on two key things: the service model and how deeply into the organisation you have embedded your Accountability Framework.
Your accountability framework
The number of Accountable Persons (and therefore the number of Accountability Statements you need to maintain) and how far down the organisation you have Statements of Responsibility (or the equivalent) will in part determine how many people will be required in the FAR function.
The service model
Like any function that has cross-organisation reach, a centralised or decentralised service model can be adopted. A decentralised approach involves representatives from across the business playing a key role via a working group or the like. This requires fewer resources in the function, but considerable stakeholder engagement. Alternatively, a centralised approach requires resources in the function to do the work on behalf of the organisation (e.g. housing, tracking and maintaining Accountability Statements). Naturally this requires more resources within the function.
Where will the resources come from?
In our experience, regardless of whether resources are external (consultants or contractors hired specifically) or internal, they will need the capability as dictated by the functional model – the ‘buckets’ of responsibility. Our FAR value chain tells us that there are three broad categories of capability required:
Operational excellence – typically the capabilities found in Strategy, Enterprise Services, Operations
Culture and engagement – typically the capabilities found in Human Resources
Risk, compliance and reporting – typically the capabilities found in General Counsel, Legal, Compliance, Risk.
Ultimately, the decision will come down to budget and internal capacity and capability.
Where will this team sit in our organisation?
It doesn’t really matter. The capabilities required in such a function are diverse and therefore means that the function doesn’t ‘naturally’ fit into any one existing function. To date we’ve seen the function reporting to the Company Secretary, sitting within the Office of the Deputy CEO, sitting in HR within Performance and Reward and sitting within Risk and Compliance. What matters is that the function has adequate sponsorship from the top of the organisation.
Want to discuss your organisation’s response to FAR, or learn more about our approach? Reach out to:
Fadi Zeitoune, principal
clare morris, director