Posted: 9th November 2023
Nisha Arora, Director of Cross Cutting Policy and Strategy at the FCA, delivered a speech last week reminding the industry about the importance of carrying out a robust annual assessment of performance against Consumer Duty.
The FCA has stated it will use the Board Report as a method of assessing firms' compliance with the Consumer Duty. The Board Report is also useful for Senior Managers to demonstrate they are complying with their own individual responsibilities.
The Board Report should look back at how the firm has delivered good customer outcomes with reference to MI including outcome testing results, what risks and issues have been identified and what actions have or will be taken to resolve or mitigate those risks. It should also look forward at the firm’s future business strategy and how it is consistent with the Consumer Duty outcomes.
So what steps do firms need to take to be ready to produce their annual Board assessment?
- For firms to be able to monitor customer outcomes it is crucial that they have mapped out the end-to-end customer journey and defined what good outcomes look like and what the key risks are at each stage are. This means mapping risks to customer journeys and defining the control suite you will monitor to manage these risks.
- End-to-end outcome testing is a vital component which is required to demonstrate that good outcomes are being achieved at an individual customer level. The data produced by this activity is key for ongoing monitoring and the annual assessment.
- A comprehensive MI suite that looks at both actual and potential risk indicators and enables firms to review, prioritise and deep dive on the data to get quality insights.
- Good quality governance needs to be in place to ensure the MI is being reviewed in the right forums and there is action being taken where risks are outside an acceptable tolerance level. Continuous improvement is key to demonstrating that the firm is adopting the right culture and is prioritising customer outcomes.
July feels a long way off, but many firms still have enhancements to do in these areas. It is crucial that firms put the work in over the next few months to demonstrate a number of months of high-quality reporting and governance to underpin the annual assessment. As Nisha rightly noted in her speech – “This will take time to do well, so don't delay!”