In Conversation – Caroline Clark – RMCSC
Meet Caroline Clark – Director RMCSC Ltd
Caroline began her career in insolvency more than 35 years ago and she has extensive experience in both personal and corporate insolvencies. Caroline has specialised in insolvency regulation and compliance since 1994 and her unique career includes nearly five years as an inspector for JIMU. Caroline has had a national responsibility for insolvency compliance and regulation for three major firms.
Caroline qualified as an insolvency practitioner in 1991, graduated with an MBA in 1999 and qualified as a mediator in 2015. Caroline is a fellow of R3 and the IPA and is a member of the IPA Board.
Q. You are a licensed Insolvency Practitioner yourself but you made the switch to regulation and compliance in 1994 when regulation was very new for Insolvency Practitioners. Today, that would look like a display of incredible foresight but what caused you to make this decision back in the 90s?
Well, as one of the first people to pass the JIEB exams, by 1994 I had about 12 years’ insolvency experience and I had been a licensed insolvency practitioner for nearly five years, heading a team in a medium sized firm dealing mainly with compulsory, creditors’ and members’ voluntary liquidations. I was starting to consider how my professional career might progress after 12 years of insolvency case work when insolvency regulation and the recruitment of JIMU inspectors started. It seemed to be an ideal way to use my existing insolvency compliance and practical knowledge and develop skills in the new area of insolvency regulation, which was clearly going to be very important in the future.
Q. Back then, did you foresee the success that would result in the practice you have today?
In 1994 my main concern was to carry out fair and objective regulatory reviews and write reports that were accepted by insolvency practitioners who were then very new to the regulatory process. From the responses I received I was successful in this and while carrying out monitoring reviews for JIMU I also wanted to develop more professional skills as well as those needed for case work. When reviewing files it is necessary to understand much more than insolvency legislation; the context of the reason for decisions, how and why systems are set up, and management and people skills are extremely important. In 1994 I wasn’t planning to set up my own business some 20 years later but I was definitely planning for a future successful professional career.
Q. Was your decision to study for an MBA directly related to the running of your own business or was it something you’d always wanted to do?
I’d wanted to graduate with an MBA ever since I learnt that MBA stood for Masters degree in Business Administration and would teach me inter alia about corporate governance, strategic decision making and risk analysis, taking my management skills far beyond the management of a portfolio of insolvency appointments. I won a scholarship from Birmingham University Business School and I am very grateful for the support for this that I received from JIMU. My MBA also fitted in very well with my ambition for a challenging professional career that went beyond insolvency case work. With the skills learnt from my MBA I could ‘think outside the box’ and understand more about the pressures on an office holding insolvency practitioner who was also running a firm, managing employees, marketing, establishing a brand, coping with competitors etc. But yes the MBA course included training about setting up your own business and this was very helpful when I decided to set up RMCSC in 2012.
Q. How has your MBA contributed to the value of the compliance consultancy service given by RMCSC to its clients?
I’ve used my MBA skills to the benefit of RMCSC’s clients in two ways, firstly adding value because I am more aware of the wider impact of the changes that may be necessary to achieve compliance, making proactive suggestions for amendments and a strategy for achieving insolvency compliance and secondly by establishing RMCSC as a unique bespoke insolvency compliance consultancy because I understand the relative importance of different compliance and business issues and how they should be managed successfully. As a result of this RMCSC has expanded since June 2017 to include anti money laundering Reg 21 audits, an additional regulatory requirement for insolvency practitioners.
I also qualified as a mediator in 2015 and the mediation training gave me additional strengths in being independent and objective, discussing sometimes very difficult subjects with insolvency office holders and achieving a practical solution for everyone without anyone becoming angry or distressed.
Q. Have you noticed any changes in attitude of insolvency practitioners to questions of compliance since those early days?
Compliance, as defined by SIP 1 and the Insolvency Code of Ethics, basically means doing a good job, fairly and transparently. I don’t think that this has changed much if at all, the vast majority of insolvency practitioners are honest, professional people who want to do a good job and this is as much the case now as it was in 1994 and earlier.
What has definitely changed since 1994 is the commerciality based approach to compliance with statute that was very common in the early days. In 1994 there was a statutory requirement for annual creditors’ meetings in liquidations, for example, but virtually no annual creditors’ meetings were held because no-one ever attended and no insolvency practitioner saw the point of them – they were seen as an expensive waste of time. The regulators expected 100% compliance with statute however, regardless of whether the statute made commercial sense. After 1994, until the legislation was changed in 2010, annual creditors’ meetings had to be called in all liquidations. The commerciality based approach to compliance with statute is no longer acceptable.
These days office holding insolvency practitioners who are asking creditors to approve their remuneration also have to disclose information about work undertaken by the office holder which is of no direct financial benefit to creditors but which is required by statute. It is the 21st century way of explaining that some of the work undertaken by insolvency practitioners cannot be justified on a commercial basis but it is still necessary to comply with statute.
Q. What are the most common compliance concerns of RMCSC’s insolvency practitioner clients?
Office holding insolvency practitioners in small or medium sized firms most frequently say to me that because of the size of their firm or regional office they have little or no feedback about the standard of their insolvency work other than from their three yearly regulatory reviews.
These insolvency practitioners have checklists and have set up systems to achieve compliance, they think and hope that these systems are successful, but they don’t know. The uncertainty makes is difficult for them to plan for the future. An annual insolvency compliance review from RMCSC means that the insolvency practitioners have a comprehensive peer review and report that includes practical suggestions for improvement and a future compliance strategy and this should banish the uncertainty. A compliance review from RMCSC is a strategic partnership with the insolvency practitioner, it is not just a tick box exercise.
All insolvency practitioners have their own specific concerns that I always discuss with them and include in their insolvency compliance review with suggestions for improvement. At the moment, insolvency practitioners are also becoming increasingly aware of the need for compliance with anti money laundering legislation, only subject to regulation since 2017. A breach of anti money laundering legislation could lead to a criminal charge as well as a regulatory sanction and RMCSC is accordingly receiving more instructions for anti money laundering Reg 21 audits.
Q. What do you see as the most important challenges to the profession in 2021 ?
Right now, in March 2021, we have all come through 12 months of pandemic including lockdown, working from home, unbelievable pressures on the economy and equally unbelievable financial support from the government to counter this. Insolvency practitioners have been affected by all this in their personal lives of course but the impact on their business lives has been equally substantial.
Compliance – making sure that everyone in the team is continuing to do a good job – will have been extremely difficult to manage with members of the team working from home. One client told me that he had moved from paper files to electronic files over a weekend in early April 2020 in order for his team to continue working, and all insolvency practitioners have had to learn new techniques from witnessing a signature when no-one can leave their home, uploading documents to Companies House and coping with the continuing directives about how to work with HMRC and the Insolvency Service. There will be ongoing change in 2021 as people hopefully return to office working for some of the time. The uncertainty about compliance that I mentioned earlier, when office holding insolvency practitioners just want a detailed, reliable peer review or insolvency compliance review so that they know whether or not they are doing a good job, will be enormous.
Perhaps surprisingly another challenge facing insolvency practitioners in 2021 is the reduction in the number of insolvency appointments since the start of the pandemic. This sounds counter intuitive because of the effect that the pandemic has had on the economy as a whole but it seems that the government’s financial support has enabled companies that were already in financial difficulty to continue trading, as well as providing support to companies experiencing difficulties solely because of the pandemic. Insolvency practitioners anticipate that there will be a substantial increase in insolvencies in 2021 as the government’s financial support lessens and the insolvency profession will have to be ready to deal with this influx of new appointments.
Q. So what would be your advice to insolvency practitioners?
I would advise insolvency practitioners to use the time they have at the moment to ensure that their systems are up to date and functioning properly so that work on their insolvency appointments is fully compliant, ready for the future. Insolvency compliance reviews should be planned strategically so that the information provided in the report is of maximum benefit to the insolvency practitioner and RMCSC can assist with this, minimising the uncertainty felt by many insolvency practitioners after the turmoil of the last twelve months.
Q. Had you not become an IP what would you have been instead ?
I’d love to have been a musician, I love singing and playing the piano, but I don’t know if I had sufficient talent to be able to make a living from music. Insolvency has done me proud!
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