Financial Accountability Regime (FAR) as an Aviation Safety Example

The Financial Accountability Regime (FAR) emphasises accountability and risk management in the financial sector. This is not dissimilar to the purpose of Safety Management Systems (SMS) in the world of aviation. Both frameworks are designed to ensure safety and compliance through structured management and personal accountability, but they operate in different industries with their unique sets of risks and regulations.

Imagine an airline as a financial institution and the aircraft as its key function. Just as the FAR aims to clearly define the roles and responsibilities of accountable persons to ensure governance and risk compliance, the SMS framework mandates that aviation organisations implement a systematic approach to managing safety, including the necessary organisational structures, accountabilities, policies, and procedures.

🔝 Accountability and Responsibility:

In aviation, the SMS framework requires that specific roles and responsibilities are assigned to ensure the safety of operations, similar to how the FAR assigns clear lines of accountability to accountable persons (AP) in the financial sector. The captain of an aircraft, akin to an AP, bears ultimate responsibility for the safety of the flight, making crucial decisions based on the information and advice provided by the crew and ground support, similar to how an AP makes strategic decisions based on input from others.

🚩 Risk Management:

Just as the FAR focuses on identifying, assessing, and mitigating risks within financial institutions, the SMS in aviation is centred around the proactive identification and management of safety risks. Flight plans are carefully analysed and modified based on weather conditions, technical issues, and other potential hazards, mirroring the financial sector's approach to anticipating and mitigating financial or non-financial risks.

🗣 Culture:

Both frameworks emphasise the importance of a strong culture that supports their objectives. In aviation, a safety culture encourages openness and transparency, allowing crew members to report issues without fear of reprisal. Similarly, the FAR promotes a culture of responsibility and openness in financial institutions, aiming to prevent issues before they escalate.

➿ Continuous Improvement:

SMS frameworks require ongoing monitoring and improvement of safety practices, analogous to the reasonable steps concepts which imply continuous review and enhancement of risk management practices under the FAR. Just as airlines learn from incidents and near-misses to improve their operations, financial institutions under the FAR are encouraged to learn from past mistakes and near-misses to enhance their risk management frameworks.

While you might be well-progressed on thinking through who has what #accountability in your organisation, don’t forget the #RealBusinessBenefit will come from embedding the right mindset and connecting the dots between accountability and risk management.

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