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04 May 2020 5 min read

CASS compliance post-Covid-19: the three time horizons

Guy Munton

Guy Munton
Partner | Regulatory compliance and CASS SME | London

CASS compliance in 2020 is now a very different proposition for firms than it was just a few weeks ago. Baringa’s 4th annual CASS Insight Survey launches on May 11th, and will examine - in addition to our standard set of questions - issues that CASS firms encounter due to Covid-19, and their responses in the transitional phase and longer term. 

Over 70 firms took part in last year’s 2019 CASS Insight Survey, and shared a vast array of data and insights. This year is developing very differently to what we and our participants predicted, and we will be adding additional data points to the 2020 survey questionnaire to explore the impact of these changes.  

Last year we asked firms to rank their top CASS-related risks, challenges, and costs in two years’ time. The most frequently cited responses were:  

  • Top risk: regulatory / business change (54% of respondents) 

  • Top challenge: staff (53%) 

  • Top cost: audit fees (87%) 

We also predicted a significant consolidation and simplification through improved technology, and impacts on a subset of firms regarding the implementation of SMCR, withdrawal from the EU, and side-effects of the changes to the FRC Assurance Standard.   

The regulator and auditors have already released a number of publications over the last weeks on the industry’s immediate challenges to CASS compliance presented by the current period of social isolation and distancing, e.g. handling cheques, performing physical asset reconciliations, depositing client money, notifying the regulator of breaches, and completing annual audit reports in a timely fashion. 

Looking beyond these ‘live’ issues, we see three phases to come, each requiring specific preparations and actions: 

Phase 1: Immediate response — there is no “one size fits all”, but firms must ensure that whatever they do, they maintain a clear and complete audit trail of all changes made, e.g. when controls are amended, a full and transparent review and approval through their governance arrangements (e.g. CASS committee and/or SMF) must be followed. In addition, firms must ensure their staff continue to get the basics right, and follow the documented procedures at all times. Even in times of crisis, it is not acceptable to “make it up as they go”. 

Phase 2: Medium term / transition phase — at some stage, firms will need to plan for a return to their offices.  This plan will likely include an element of cross training or even co-sourcing of staff to perform multiple roles/processes to cover for increased absence due to illness, as well as considering to very carefully undo any of the changes made in haste in the previous phase (e.g. providing systems access to a broader population of staff). 

Phase 3: The future — this is not about getting back to where firms were before Covid-19, but is rather an opportunity to figure out where they want to be, and to plan for that. Some examples of objectives firms could set include:  

  • automating a certain percentage of processes and controls  

  • reducing the amount of physical paper in use – e.g. phasing out cheques and/or de-materialising physical assets where possible 

  • bringing critical operations that have not responded well to recent pressures back onshore and/or in-house  

  • reviewing / simplifying strategic technical architecture in light of any systems implemented quickly in the preceding phase(s). 

Finally, firms will also need to look at building revised playbooks and interfacing with their broader responsibilities regarding operational resilience to ensure they are well prepared for any future event on a similar scale. 

Baringa’s 2020 survey will cover these topics with a view to capturing how the Covid-19 restrictions are impacting firms’ abilities to maintain CASS-compliance, and how they are planning for a successful transition to yet another ‘new normal’ in 2021 and beyond.  

If you have any specific topics or questions you would like to add to this year’s survey, contact us by emailing cass@baringa.com 

The survey will launch on May 11th. In the interim, please register your intention to participate here, and we will contact you in due course.