Chuck Prince famously said that: ‘When the music is playing, you have to get up and dance.”

Well, the music stopped some time ago and new regulatory brooms are busy trying to sweep up the mess. This year there are far reaching regulatory activities underway which will have significant implications for training needs in the City.

They include: the new AIFM Directive, the review of MiFID, new clearing requirements for OTC derivatives and changing rules on short selling, as well as preparations for Basel III.

As if these weren’t enough, both the European and the UK regulatory authorities are undergoing significant structural change, so regulated entities will have to report to new people on new issues and data.

Many firms will have already factored these into their training programmes for 2011 and are looking beyond these to consider their implications for the future. However, too much focus on obvious regulatory changes risks overlooking areas of existing regulation where knowledge gaps remain.

The FSA, as will its successors, requires firms to monitor, manage and control risks. However the recent financial crisis demonstrated that some financial institutions failed to understand, measure and manage the inherent risks in some of their key products and misunderstood the systemic risks they carried.

Historically, training usually focussed on the quantification of risk. However, increasingly, a qualitative understanding of risk and an understanding of the limitations of a quantitative approach are essential to ensure that risk is properly managed.

In future, training needs to focus on providing relevant risk management skills tailored to different needs at all levels of the organisation. Senior staff need to be equipped to assess and challenge information that is being put to them, to understand when and how to question the emperor’s new clothes and to establish a culture that empowers and encourages staff to question and probe.

There is also a real need for people in relevant roles to be able to investigate effectively.
This is particularly necessary for senior staff, compliance officers and perhaps most importantly, for regulatory staff.

For the City to continue to thrive, improved risk and regulatory training is crucial. The trainers who are able to provide it are guaranteed a bountiful future – in 2011 and beyond.

The International Centre for Financial Regulation (ICFR) is an independent, not for profit organisation supported by industry and government to provide information and training to improve risk management in the City. An updated version of the ICFR Regulatory Radar(tm) is periodically posted to the ICFR website at www.icffr.org .