Managing Employee Risk – Part 1 – Recruitment and Induction

The past couple of years, with the difficulties in recruiting and retaining personnel, the extension of the civil penalties regime, the increasing demands of clients and the increasing expectations of personnel, have highlighted yet further the importance of managing the performance of a regulated business’ personnel and the risks that they present throughout  the course of their time at the business and also the risks that the business could present to them.

In these three articles, we set out some high-level thoughts on how a business can manage the risks presented by an employee throughout their time with the business and, conversely, how an employee can manage the risks presented by their employment.

Recruitment

Proper preparation for recruitment can have a significant impact on the quality and ease of the process. Whilst recruitment is often driven by a business’ HR Team, it is essential that the relevant client-facing or technical teams are actively engaged to ensure that the business recruits the people it needs in terms of experience, knowledge and skills.

For example, it is worth giving some thought to the job description for a role so that everyone knows what they are looking for in a recruit and so the candidate or new recruit knows what is expected of them. Job descriptions can also be a useful way of setting out any qualifications or experience which are stipulated by the JFSC for a particular role as well as evidencing the responsibilities of a role (in particular whether a role is for a Principal Person / Director, Key Person or Senior Manager). They can also demonstrate the allocation of roles between peers such as the allocation of responsibilities between the different directors of a board.

Interviewing a candidate is likely to be the first significant opportunity for the business to make a good impression on the candidate and it’s important to remember that at the same time as the business is interviewing a candidate, that candidate is also interviewing the business. Interviews are another point where it is essential that HR and client-facing / technical staff work together, particularly when interviewing candidates for positions where a significant amount of technical knowledge is required so that the technical staff can ask the technical questions and understand whether or not the interviewee’s answers are acceptable.

Once the field of recruits has been narrowed down, a business should check the potential employee’s credentials, seeking evidence of the individual’s professional qualifications and previous experience, following up with referees and even more fundamentally getting proof of identity from the individual. You will need this in order to conduct meaningful screening checks, particularly police checks. Finally, a review of open source information is easy and potentially very useful.

The example of Pippa Harbour and the public statements issued by the GFSC and the JFSC demonstrate the importance of these checks and wider employee screening.

Due Diligence on Prospective Employers

Similarly, candidates should conduct their own checks on a prospective employer, particularly where the role attracts potentially significant responsibilities, such as a director, key person or other form of senior manager. Responsibilities come with risks and so any candidate should want to make sure they fully understand what they would be taking on. In our view, a regulated business should see it is a real positive if a candidate for a senior position asks some truly penetrating questions and then wants sight of relevant documentation (having signed an appropriate NDA) as this might indicate that the candidate understands the responsibilities of the role and may be capable of fulfilling them.

For any role, however junior and even before submitting an application, a candidate can review open source information and media to see what information is available on the potential employer.

Induction

A comprehensive and thought-through induction can provide a solid foundation for an employee’s time with a business. Some suggested steps include:

• Ensuring that any stipulated training is completed and evidenced;
• Obtaining a list of all relevant conflicts of interest from the new employee so that the business can implement appropriate mitigating measures right from the outset;
• Ensuring that any new recruit with a responsible role such as director, compliance or legal counsel, is brought up to speed on any issues quickly by meeting relevant colleagues and having sight of necessary documentation;
• Assisting with the preparation for an interview by the JFSC (particularly common where it is the individual’s first appointment at that senior level, where it is a new sector for the individual or where the business itself is under some form of heightened supervision by the regulator). It’s worth the individual giving some thought to matters including:
  • any known issues at the business, key risks, its business model and strategy;
  • any hot topics within the industry or sector;
  • the business’s governance, framework and controls;
  • the applicable legal and regulatory regime;
  • initial impressions of the business and its culture.

Next

In the next article, we consider the management of risk once the employee is on-board, as part of a business’ ongoing oversight of its personnel.