How to Prepare Your Board for an SMCR Accountability Challenge
This guide sets out how to ready your board and Senior Managers for a regulator-led accountability challenge under SMCR, including where the evidentiary weaknesses usually sit. After reading, you will know what to test, what to document, and how to sequence the internal work before the FCA or PRA comes knocking.
An SMCR accountability challenge rarely arrives as a surprise. It follows a supervisory concern that has been forming for months: a remediation that slipped, a control failure that reached the risk committee too late, a Statement of Responsibilities that no longer matches how decisions actually get made. By the time the regulator asks who was responsible for what, the answer needs to already exist, in writing, with a defensible trail behind it.
Most boards think they are prepared because the SMCR paperwork is current. They are not. The paperwork is the floor, not the test.
Start with the question the regulator will actually ask
The FCA and PRA are not testing whether you have a Statement of Responsibilities. They are testing whether a specific Senior Manager took reasonable steps to prevent or stop a specific harm. That is a factual enquiry, not a documentary one. It asks: what did they know, when did they know it, what did they do, and was it enough given the seniority of the role and the resources available.
Work backwards from that question. Pick the two or three areas where supervisory interest is most likely (Consumer Duty outcomes, operational resilience, financial crime, a recent incident) and stress-test the reasonable steps trail for each accountable SMF. If you cannot produce a coherent narrative in a morning, the regulator will find the gap in a week.
Reconcile the map to the territory
The most common failure point is drift between the Responsibilities Map and how the firm actually runs. Matrix structures, dual-hatted roles, offshored functions, and interim arrangements after a departure all create ambiguity about who owns what. Regulators are alert to this and will probe overlaps and gaps hard.
Commission a short, independent review, ideally by someone outside the second line, to walk through each Prescribed Responsibility and Overall Responsibility and confirm three things: the named SMF genuinely exercises the authority; the reporting lines into them are real, not nominal; and any handover or sharing arrangement is documented with dates. Fix the drift before you fix the paperwork.
Rebuild the reasonable steps evidence base
Reasonable steps is where accountability challenges are won or lost. Good evidence looks like this: minuted challenge from the SMF in committee, follow-up actions tracked to closure, escalations that name the issue and the risk, MI that shows the SMF was seeing the right data at the right frequency, and clear evidence they acted when the data changed.
What most firms have instead: attendance records, generic minutes, and MI packs that arrived but were never interrogated. That will not survive scrutiny.
For each SMF likely to be in scope, assemble a reasonable steps file covering the last 18 to 24 months. If the file is thin, the answer is not to backfill. It is to start creating the evidence now and to be honest internally about the exposure.
Prepare the individuals, not just the firm
Senior Managers under challenge often make things worse in the first interview. They over-explain, they blame the collective, or they concede points they should have tested. Each SMF likely to be interviewed needs individual preparation: a clear grasp of their own Statement, their MI trail, and the decisions they personally made or escalated. Legal privilege on this preparation matters and should be structured deliberately.
The Chair and SID have a separate role: to demonstrate that the board held executives to account, not that it deferred to them. Board minutes should show this. If they do not, that is a governance problem the Chair needs to own.
Sequence the internal work
Run the diagnostic first (map versus reality, evidence gaps), then remediate the structural issues (responsibilities, MI, escalation routes), then prepare the individuals. Doing it in the reverse order, which many firms do under pressure, produces polished witnesses defending an indefensible structure.
The decision point
Before the next board meeting, ask your Company Secretary and General Counsel one question: if the regulator wrote to us tomorrow asking for the reasonable steps evidence on our top three supervisory risks, could we send a complete file within ten working days without creating anything new. If the answer is no, that is the work.
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