The Consumer Duty Board Report Deadline is Looming - Are You Ready?
The FCA requires each firm’s Board or Governing Body (Board) to review and approve annually an assessment of whether the firm is delivering good outcomes for its customers that are consistent with the Consumer Duty. The first such report is due by 31st July 2024.
Firms must assess their data and provide evidence of their customer outcome monitoring to ensure their proposition meets the necessary standards. This includes improvements to address any risks or issues and ensuring that future business strategy aligns with the Consumer Duty’s aim of consistently delivering good outcomes.
Taking a critical view of the firm’s progress is vital. It is important that firms detail positive outcomes which their clients are receiving, and also evidence any poor outcomes being received, and any other gaps that are identified. It is equally important for firms to be open and honest about these challenges, as that then provides the opportunity to demonstrate that they are being captured, and what is going to be done about it. The FCA rarely expects perfection in compliance and will always look favourably on a firm that is able to acknowledge concerns, with the key being that the firm has a clear action plan to remediate any issues or shortcomings.
What should be in included in the report?
Executive summary
a brief overview of the Consumer Duty implementation programme and the progress since implementation;
highlight key achievements, challenges, and any significant incidents; and
explain how the business strategy is aligned with its obligations under Principle 12 and PRIN 2A.
Culture and purpose
evidence of the alignment of culture and the firm’s defined purpose to the Consumer Duty, including factors such as changes to remuneration policy, rewards structures, and incentive schemes; and
how Consumer Duty training was delivered and how understanding was evidenced.
Customer outcome monitoring (evidence is critical)
how does performance compare against the FCA’s four outcomes?
summarise how products and services were changed to comply with Consumer Duty, particularly price and value;
consider the customer journey and the results of any outcomes testing; and
outline the general approach to vulnerable customers and how they have been impacted by the Consumer Duty.
First line oversight
highlight the key risks or areas of concern identified since the Consumer Duty’s implementation and the respective actions taken to mitigate those risks; and
include an action log with a root cause analysis, and action owners.
Second line oversight
highlight any second and third-line monitoring activities that have been undertaken, as well as any monitoring reviews that are planned to be undertaken; and
an overall view of the strength of the risk and compliance (second line of defence) function since the Duty's implementation.
Alignment to business strategy
In the report, firms also need to demonstrate an assessment of their current and forward-looking business strategy and whether it is consistent with acting to deliver good outcomes for retail clients under the Consumer Duty.
The report should answer the question: how is your firm ensuring that what you are doing is customer focused?
Board approval
The Board is required to review the detail contained within the report, and as part of this:
review and approve the report of customer outcomes, including the actions taken;
confirm it is satisfied that the firm is complying with the Consumer Duty; and
assess whether the firm’s business strategy complies with the Duty under Principle 12 and PRIN 2A.
This is also an opportunity to demonstrate that the Consumer Duty has been embedded into the firm's Governance and into its culture.
What else to consider
where will accountability and ownership lie for producing the report?
how does your firm’s culture and strategy align with the Consumer Duty’s principles?
how are vulnerable customers being considered in the context of the report?
what is the role of the Board’s Consumer Duty Champion in relation to the Board report?
are governance roles and responsibilities at Board level updated to reflect the Board’s responsibilities concerning the report?
are agendas and meeting minutes adequately documented to reflect the discharge of roles and responsibilities?
the executive’s own the delivery of the Consumer Duty.
the Board provides review and challenge, it also sets the strategy and assures the business that it is delivering outcomes in line with the Consumer Duty.
This may feel like a lot of work, even if you have been collecting the relevant MI and are able to extract it efficiently. If you are a smaller firm that needs to produce a report for your firm’s Governing Body, you may not have the resources to produce the report in the time you have left.
If you need assistance drafting your report to the Governing Body, please contact Compliance Matters UK Limited for an initial consultation.
Comments