Three governance challenges generate more boardroom activity at FCA-regulated firms than any others: appointing the right Chief Risk Officer and positioning the role effectively within the governance structure; ensuring that committee chair designations — particularly those with specific regulatory accountability under SMCR — are filled with candidates who genuinely meet the standard the FCA expects; and managing CEO succession without creating the regulatory exposure that an inadequately planned transition produces. Each of these challenges is well-documented at the level of regulatory principle. The practical implementation guidance that would actually help boards navigate them is considerably harder to find.
Exec Capital has published a series of governance guides and thought leadership pieces that address each of these challenges in practical terms. This article draws on those resources to provide boards, nomination committees and the investors and advisers who support them with a framework for thinking about these governance priorities.
The Chief Risk Officer: Getting the Governance Positioning Right Before the Appointment
The most consequential governance decision in a CRO appointment is not the choice of candidate. It is the decision about how the role is structured — what the CRO’s reporting line is, what formal authority they have to challenge business decisions that exceed the firm’s risk appetite, and whether the governance documentation reflects their actual authority or a more expansive set of responsibilities than they can genuinely exercise.
A CRO who holds the SMF4 designation and whose Statement of Responsibilities describes accountability for the firm’s risk management framework — but who does not have a formal escalation right that allows them to bring risk concerns directly to the board without the CEO’s approval — is accountable for an outcome they may not have the authority to control. This is not a theoretical governance problem. It is the specific governance failure that leads to enforcement action against named individuals when risk management failures occur: an SMF holder who was accountable for an area they could not genuinely govern.
The governance positioning question must be addressed before the search begins. If the CRO will have a genuine secondary reporting line to the Risk Committee Chair, genuine escalation rights, and genuine independence from the business lines they oversee, the search can be conducted with an appropriate profile in mind. If the CRO is being appointed primarily to satisfy a regulatory requirement without the governance structure to back up the designation, that is a problem the appointment process alone cannot solve. Exec Capital’s guide to board-level CRO governance and SMF4 approval considerations addresses this dimension directly, alongside the FCA’s regulatory interview process and how the Statement of Responsibilities should be drafted for an SMF4 holder.
For banks and insurers subject to dual PRA and FCA regulation, the CRO appointment carries specific additional complexity. The PRA’s fitness and propriety assessment is more intensive than the FCA’s for risk function appointments at banks, and the regulatory interview — a standard part of the process for significant firms rather than a discretionary one — will explore the candidate’s understanding of the firm’s prudential risk profile, including credit quality, capital model, and ICAAP. The distinction between a CRO who can build a risk framework from scratch (appropriate for challenger banks and growth-stage regulated firms) and one who can operate a mature risk function with institutional supervisory discipline (appropriate for established banks) is critical and consistently gets less attention than it deserves in search briefs. Exec Capital’s guide to CRO recruitment at challenger banks and dual-regulated firms covers the build versus manage distinction, the PRA’s specific supervisory expectations, and the ICAAP dimension of the role that challenger bank CROs must be able to own credibly.
For boards seeking a broader overview of CRO recruitment across all firm types — permanent, interim and fractional, regulated and unregulated — the Exec Capital CRO recruitment guide provides context on candidate profiles, compensation benchmarks, sector coverage and the search process.
Committee Chair Governance: The Designations That Need More Rigour
Nomination committees at regulated firms apply rigorous process to a small number of appointments — CEO, CFO, Chair — and considerably less rigour to others. The committee chair designations (SMF10-13) are the most frequent victims of this governance asymmetry. They carry genuine personal regulatory accountability under SMCR, they involve specific competence requirements that not all NED candidates meet, and they are often filled by whoever is available and vaguely relevant rather than by the candidate who genuinely meets the FCA’s expectations of the function.
The Remuneration Committee Chair (SMF12) is the most technically demanding of the committee chair designations because it requires genuine understanding of the remuneration code requirements applicable to the firm — MIFIDPRU at investment firms, the Dual Regulated Firms Remuneration Code at banks, Solvency II provisions at insurers. A Chair who cannot assess whether a proposed deferral structure complies with the applicable code, who relies entirely on management or external advisers for code compliance conclusions without forming an independent view, or whose malus governance is nominal rather than genuine, is not providing the oversight the FCA’s remuneration governance framework requires. The consequences of inadequate Remuneration Committee governance are direct: the FCA can and does challenge the compliance of remuneration structures, and the SMF12 holder is personally accountable for the quality of the committee’s oversight. Exec Capital’s guide to the SMF12 Remuneration Committee Chair covers the technical obligations of the role, common governance failures in remuneration oversight, and the specific requirements of the regulatory interview for an SMF12 candidate.
The Nominations Committee Chair (SMF13) is the designation most directly accountable for the quality of the governance process that produces all the other appointments. The SMF13 holder is responsible for the board’s succession planning, the ongoing fitness and propriety monitoring of existing SMF holders, the annual board effectiveness review, and — increasingly under the FCA’s diversity and inclusion supervisory agenda — the firm’s diversity governance. A Nominations Committee Chair who treats these as procedural requirements rather than substantive governance obligations is not meeting the FCA’s standard. Exec Capital’s guide to the SMF13 Chair of Nominations Committee addresses the full scope of the designation’s responsibilities, including the ongoing fitness monitoring function that most regulated firms systematically underperform.
For retail-facing regulated firms, Consumer Duty has added a substantive new dimension to the Chair’s role that goes beyond the general governance oversight obligations of the SMF9 designation. The Chair must now lead a board process that results in a formal annual confirmation — supported by evidence — that the firm is delivering good outcomes for retail clients across all four Consumer Duty outcome areas. A Chair who lacks the consumer-facing financial services expertise to evaluate management’s Consumer Duty assessment is bringing a governance gap to a regulatory accountability that has become one of the FCA’s primary supervisory focuses. Exec Capital’s guide to the Chair’s role in Consumer Duty oversight sets out what this requires in practice and what it means for the Chair appointment brief at retail-facing regulated firms.
CEO and Chair Succession: Managing the Timeline Before It Manages You
CEO succession at a regulated firm involves a regulatory dimension that does not exist at unregulated businesses and that boards consistently underestimate until they are in the middle of managing it. The FCA notification obligations, temporary SMF coverage requirements, and Form A approval timeline together create a process that takes five to nine months under favourable conditions — and considerably longer at complex firms or where the approval process encounters complications.
Boards that wait for a CEO departure to become imminent before initiating the succession process are building a structural timeline problem that will produce one of three outcomes: an appointment decision made under time pressure that compromises the quality of the outcome; an extended period of interim coverage that creates operational and regulatory uncertainty; or both. The FCA expects regulated firms to have current, substantive succession plans that would allow them to respond to an unplanned CEO departure without the kind of reactive governance scramble that reveals to the regulator that succession planning has been nominal rather than genuine.
The communication strategy during a CEO transition is equally important. The FCA should be briefed before a departure is made public, not simultaneously. The regulator should receive a substantive communication — setting out the succession plan, the interim coverage arrangements, and the board’s timeline for a permanent appointment — rather than a bare notification of a vacancy. How the board manages this communication sets the tone for the supervisory relationship during the transition period, which is precisely when that relationship matters most. Exec Capital’s guide to CEO succession at regulated firms covers the planning horizon, the FCA engagement strategy, interim SMF1 coverage, and what the outgoing CEO’s obligations are during the transition.
At PE-backed regulated firms, Chair succession presents a specific set of pressures. The investor’s commercial timeline — shaped by portfolio company performance, transaction milestones, and the investor-management relationship — does not automatically align with the FCA’s regulatory approval timeline or with the governance requirements for a credible Chair appointment process. A Chair selection driven by the investor’s commercial preferences without adequate consideration of the FCA’s fitness and propriety assessment, the regulatory interview process, or the specific governance requirements of the SMF9 designation at the firm type in question, will produce both a weaker regulatory relationship and a weaker governance outcome than a process that integrates both dimensions from the outset. Exec Capital’s guide to Chair succession at PE-backed financial services businesses addresses the investor-regulator tension, the commercial and governance criteria that the brief must satisfy simultaneously, and the compensation structures that attract the right candidate profile for PE-backed regulated firm Chair roles.
Understanding the Full SMCR Population
One governance gap that cuts across all of the above is the incomplete understanding that most regulated firms have of their full SMCR population. The Senior Managers Regime receives adequate attention because it involves FCA pre-approval and is visible in the Form A process. The Certification Regime — which covers the broader population of individuals whose roles have significant potential to cause harm but who require the firm’s own annual assessment rather than FCA pre-approval — is frequently under-scoped, under-administered and under-understood.
The practical consequences of an inaccurately scoped Certification Regime population are significant. Individuals who should be certified are performing functions without the required assessment. The annual certification process, where it exists, is often nominal — producing certificates without a genuine fitness and propriety evaluation. And the regulatory reference obligations that connect the Certification Regime to the Senior Managers Regime — the obligation to provide honest, complete regulatory references for certified persons who move to new employers — are frequently discharged at the minimum required rather than the FCA-expected standard. Exec Capital’s guide to the distinction between the Senior Managers Regime and the Certification Regime clarifies both tiers, the FCA’s Financial Services Register and Directory obligations, and what the regulatory reference requirements mean for hiring decisions across the full SMCR population.
Bringing It Together: Governance as a Competitive Advantage
The regulated firms that have the most productive supervisory relationships with the FCA are not those that produce the most documentation or comply most punctiliously with the formal requirements of SMCR. They are those whose boards genuinely understand what the personal accountability framework requires — where the individuals holding SMF designations have thought carefully about their Statements of Responsibilities, where the succession planning is real rather than nominal, where the committee chairs have the specific competence the FCA expects rather than the general governance credibility that would be adequate at an unregulated firm.
This is partly a governance discipline question and partly a talent question. The right individuals in the right roles, with the right understanding of their regulatory obligations, produce better supervisory outcomes than adequate individuals in poorly structured roles regardless of how well-intentioned the governance framework is. The guides referenced in this article are tools to close the gap between governance intention and governance reality — and the search work that follows from identifying the gap is what Exec Capital does.
Exec Capital specialises in executive search for FCA-regulated firms — placing Chief Risk Officers, Chairs, committee chairs, executive directors and senior compliance professionals across the full range of regulated firm types. The Exec Capital FCA regulated firm practice integrates Form A approval support, governance positioning advice and succession planning guidance into every search engagement. Every regulated firm mandate is led personally by Adrian Lawrence FCA: 0203 834 9616.
