There remain, in our view, a few issues which the PRA has not directly addressed, perhaps intentionally to allow firms the flexibility to interpret the regulator's requirements in accordance with their business model.

The PRA has recently issued its Supervisory Statement on 'Corporate Governance: Board responsibilities'. Based on our observations from carrying out board effectiveness evaluations for PRA and FCA regulated firms, we responded to the consultation paper published in May last year, and we share some tips for Board Effectiveness Reviews below.

In particular the Statement lacks specific guidance on how a Board should deal with the interplay between strategy at Group and subsidiary / syndicate / firm level. For example, it provides no clarification on how a subsidiary which contributes a significant percentage of the wider Group revenue, or via which a significant proportion of the Group's expenses are channelled, determines the focus of its strategy whilst ensuring it remains independent from Group. The Statement does, however, recognise the potential for conflicts of interest between the firm and the wider group, especially where there are cross directorships. In our view, firms should consider a protocol for the sharing of information to deal with situations where either a conflict of interest or confidentiality issues arise.

The Statement acknowledges there may be discussions which take place outside of formalised board meetings. However, it does not explicitly require that these should be minuted. We have been privy to firms' challenges of allocating sufficient time to business as usual items on the board's agenda when 'special' or unexpected agenda items arise. As such we often recommend that firms note any ad hoc discussions / meetings - particularly in relation to key areas such as risk – ensuring evidence of challenge to the board is properly documented.

The PRA expects NEDs to receive appropriate 'induction, ongoing training and professional advice' but sets no guidelines as to (a) what would constitute sufficient training / personal development programmes, or (b) how its expectations may differ between NEDs and INEDs. Firms which embed Corporate Governance most effectively often implement mentoring programmes and one-on-one sessions between the Chairman and INEDs, in addition to bespoke training programmes for NEDs and senior management.

Unsurprisingly the PRA expects the provision of 'timely, accurate, complete and relevant management information (MI)' to be provided to the board. Many boards will agree with such a statement, but those doing the actual reporting may well groan at the reminder of the challenge they face on a daily basis: how to meet regulators' expectations on MI output without producing 'unwieldy' documentation to the board. This is compounded when a simplification on the detail required in certain technical areas could potentially sacrifice proper challenge by the NEDs. In short, 'quality rather than quantity' is key, but firms may have to look to more technologically advanced data capture to achieve this; the quality of MI depends on the quality of the firm's record-keeping systems and controls.

Whilst further clarity in some areas would be helpful, in others the regulator is perhaps too specific – for example, the reference to at least two NEDs, even for smaller firms, is in our view too specific and may be unrealistic. In practice it is difficult to find enough high quality INEDs.

The underlying message? Treat Board Effectiveness Reviews as an opportunity – not just a 'tick box' exercise

The statement reinforces the PRA's expectation of effective board evaluations. Our advice? Don't short-circuit. Whilst it is demanding on time and resource, a thorough and well thought-out questionnaire and interview process (which should include the chairman, board and senior management) will demonstrate to the regulator you are taking your corporate governance obligations seriously, and not treating the review simply as a 'tick box' exercise.

On a practical note, whether engaging an external third party or conducting the review internally (the independence of the former may provide a more meaningful end result in the eyes of the regulator) – use a mix of closed and open questions to demonstrate the board is open to challenge and debate. The review could even provide a platform from which to invoke change or embed the culture of the firm, reinforcing the 'tone from the top'.

Questions around the structure of the firm are important, particularly where there is a large degree of overlap between board and committee(s) in terms of both agenda items and personnel. This may lead to poor management, poor reporting and a waste of everyone's time at committee and board meetings.

We all know that assessing board effectiveness, when done properly, can provide effective long-term solutions to issues relating to time, resource, and management. However with the implementation of the SMR and SIMR earlier this year, the regulator's increasing focus on individual accountability means stress-testing corporate governance is now critical for regulated firms across the financial services sector.