Imagine a world where innovation is constant and regulation non-existent. Where new technologies are introduced at lightning speed without protocols around data management and data protection, for example. Would that be a world any of us would really want to exist in?
When it comes to financial services, a crucial role of regulation is to safeguard the interests of investors and provide trust in financial products.
Take for example the Guernsey Green Fund regime which provides regulated fund assurance to investors. This was developed as a world first by the Guernsey regulator – where fund assets being independently vetted to meet green criteria, thus preventing greenwashing – regulators can be innovative too.
Innovation and governance are hot topics in the finance sector. Generally, regulation is attempting to keep up with the fast-paced environment of innovation - just look at cryptocurrency as an example. Therefore the ability of boards, management and governance professionals to build control mechanisms in line with purpose, direction, decision-making and focus for innovation is more important than ever.
The finance sector thrives on innovation with new products and new asset classes reacting to shifts like energy transition requirements, disruptive tech solutions to meet environmental challenges and digital progressions driving ingenuity to name a few. Whilst in Guernsey the local regulator reacts to the market and has a proven track record of innovation to provide the required regulation, it is often at the organisation itself that policies and mechanisms are designed to support innovation in a controlled environment.
The role of the governance professional is important as it offers a link between the differing areas within an organisation be it a fund vehicle, investment manager company or operating company to discuss innovation, regulation and policy changes, ensuring board effectiveness through suitable papers and sufficient agenda time for creative discussion as part of the decision-making process.
The culture of the board and the management committees should be such that innovation is encouraged through open discussion and creative thinking. This can be achieved by ensuring the right people with the right personal skills, knowledge and experience are encouraged to participate in these decision-making groups to drive the creative-decision making forward into practical project work and ultimate implementation.
The mechanisms and controls to ensure innovation falls within governance best practice, ethical frameworks and the existing regulation is the role of the governance professional to provide guidance as required. Decision-making groups within organisations need to be carefully resourced. This will allow innovation to flourish in a sustainable way and can be maintained in the longer term.
This topic will be explored further at The Chartered Governance Institute UK & Ireland conference in Guernsey, Governance Guernsey, on 29 September with a panel of experts in their fields of innovation, moderated by Rebecca Booth.
Rebecca is client director at Guernsey-based administration firm, Carey, whose professionals in accounting, risk, governance and regulation apply their in-depth knowledge to work in partnership with corporate, private wealth and fund clients.
To discuss this topic or find about more about Carey, Rebecca can be contacted at firstname.lastname@example.org