Why Regulated Boards Need a Skills Matrix

When things go wrong at a regulated firm, one of the first questions supervisors ask is whether the board had the expertise to see it coming. A board with no technology experience overseeing a cyber incident, or no retail experience overseeing Consumer Duty outcomes, is hard to defend. A skills matrix makes those gaps visible before they matter.

It’s also practical. Board appointments, particularly chair and committee chair roles that carry Senior Manager Functions, take months to complete. A current matrix tells the nomination committee what the next appointment needs to bring, long before a vacancy arises. The UK Corporate Governance Code asks boards to consider the balance of skills, experience and knowledge, and many regulated firms outside its formal scope follow the same approach.

What’s in the Template

The 14 Skills Areas

The template’s areas reflect what regulators expect regulated boards to cover:

Add or remove areas to reflect your firm. A payments firm might add payments infrastructure and safeguarding; an insurer might add underwriting and reserving.

How to Complete It

Rate Honestly

The template uses a simple scale: 3 for deep expertise, meaning the person has led in that area; 2 for solid working knowledge; 1 for basic awareness; and 0 for none. The matrix is only useful if the ratings are honest. Self-assessment tends to overstate, so many boards have the chair or company secretary moderate the results.

Look for Real Coverage, Not Totals

A high total score can hide a gap. If the only person with deep technology experience is about to leave, coverage is weaker than the numbers suggest. Look at how many members have a 3 or 2 in each area, and how soon they’re due to leave.

Check the Committee Chairs

Each committee chair needs the expertise their committee requires. An audit committee chair without strong financial reporting experience, or a risk committee chair without risk experience, is a gap regulators will notice. Our guide to SMF10 and SMF11 covers what these roles require.

Turn Gaps Into Actions

Every gap should lead to an action: training for an existing member, an external adviser to the board or a committee, or a new appointment.

Using the Matrix for Appointments

Before every board appointment, update the matrix and use it to write the role specification. It tells you not only which skills to look for, but which ones you can trade off because others already have them. For roles that carry Senior Manager Functions, such as the chair or committee chairs, the matrix also helps show the regulator how the candidate fits the board. See chair and committee chair recruitment and our page on non-executive directors at FCA-regulated firms.

For independent non-executive roles that don’t carry a Senior Manager Function, NED Capital, a sister practice of SMF Capital, specialises in non-executive recruitment.

Common Mistakes

• Generic areas that don’t reflect the firm’s actual risks and regulators.
• Inflated self-ratings that hide real gaps.
• Ignoring tenure, so gaps appear suddenly when members leave.
• No link to committees, so committee chairs lack the expertise their committee needs.
• Completing it once and never updating it.
• No actions arising from the gaps identified.

Linking It to the Board Effectiveness Review

The matrix works best alongside the annual board effectiveness review. The review shows how the board operates; the matrix shows what it knows. Together they give the nomination committee a clear view of what to change.

Dual-Regulated Firms

At banks, building societies and insurers, the PRA considers whether the board as a whole is suitable. A current skills matrix is one of the best ways to show how each appointment contributes to that. Our post on PRA collective suitability explains the expectation.

Diversity of Experience

A skills matrix also helps boards avoid having too many people with the same background. A board made up entirely of former bankers, or entirely of people from one firm, may share the same blind spots. Look at the range of perspectives as well as the depth of expertise. Diverse experience tends to produce better challenge.

Smaller Firms

Smaller regulated firms with compact boards benefit just as much, sometimes more. With only three or four directors, a single gap can mean nobody on the board understands a major risk. A simple version of the matrix, completed once a year, often shows the case for adding one independent non-executive with the missing experience.

Frequently Asked Questions

How often should we update the skills matrix?

At least annually, and before every board appointment or significant change in strategy.

Who should complete it?

Usually the company secretary or chair, with input from each director and review by the nomination committee.

Should we publish it?

Some listed companies publish a summary in their annual report. Most regulated firms keep the detailed matrix internal.

Is the template free?

Yes. Download it and adapt it for your board. It’s general guidance, not legal or regulatory advice.