As regulated firms finalise their first Consumer Duty Board Reports, which set out their firm’s position in embedding the new Consumer Duty, many executives and non-executives are grappling with what that means in practice.

We recently hosted a roundtable discussion for senior leaders in retail banking, who provided significant insight on their own experiences and considerations. We have reflected on this discussion and developed several themes for this blog.

Owning and sharing your story

At the heart of the Consumer Duty Board Report lies the fundamental question: "Are we delivering good customer outcomes?".  The most compelling way to actively demonstrate good outcomes will be to have a clear and evidence-based narrative, supporting what you have done well, and examples where you identified opportunities for enhancement. This will demonstrate that you have an engaged 'First Line of Defence'. Many firms adopting this approach – with the first line holding the pen on much of the report - have extracted powerful examples to illustrate the changes made and how they are able to evidence good outcomes.  

The FCA is not expecting firms to be perfect, so sharing your lessons learned can tell a powerful story. Remember that you should focus on answering “How are we delivering good customer outcomes?”, rather than simply “Why we are tracking ‘green?’” or – if you really want to set Supervisors’ alarm bells ringing – “Nothing to see here”! The FCA has been clear about the iterative and progressive nature of Consumer Duty and will want to see how the Duty has positively disrupted thinking within the industry. 

Having a clear structure

On the whole, there appears to be a consistent structure being adopted to reports. This consensus has emerged from both FCA guidance, firms, and industry bodies, all using the four key outcomes to provide a backbone for the report. However, it is also important to consider other important factors to clearly demonstrate your authenticity and the steps you’ve taken. This could include: 

• Detail on your approach and outcomes delivered to vulnerable customers 
• The role played by third party suppliers in delivering outcomes to your customers, and how you exercise oversight over those relationships 
• How Consumer Duty is embedding within your overall culture 
• Areas you have identified for future exploration and development (learn and growth) 
• Lessons learned and examples of how the Duty is delivering good customer outcomes 
• Your interaction with, and support from external advisors. 

These elements of your narrative allow you to clearly frame the story of your firm’s journey, using data in support.  The FCA will want to see how you have changed, how you will continue to evolve, and how you can demonstrate that the spirit of Consumer Duty is embedding within the overall business, rather than being viewed as a standalone compliance exercise.  

Finally, it is also important to acknowledge any major incidents or outages that may have resulted in customers not being able to achieve their objectives, such as make payments via their mobile banking apps. Acknowledging the detail of these incidents should support your overall narrative, enable you to show how you rectified matters for customers, and demonstrate how you are embedding further changes based upon what have learned. 

Comprehensive, but comprehensible

 A key challenge of the board report is balancing the required detail without overwhelming readers. There is no right or wrong length to the report and we have seen a wide variation in the number of pages contained within different firms’ draft reports. When considering your own report, you should ask yourself the following questions:

• Does this contain the right amount of detail for Board members to review, discuss, and draw their conclusions?  
• Is there any unnecessary repetition? Whilst you may well want to reiterate key messages, you don’t want to risk diluting your message or losing the audience’s attention. 
• Is the report proportionate to the scale, risk, and complexity of the business(es)? 

It's also important to remember the needs of the different audiences that the board report will have. Whilst written as an ‘internal’ document, the FCA will likely request sight of these assessments. Your report should seek to meet the needs of all key stakeholders.

Managing your NEDs

Over the past ten years, we have undoubtedly seen an increase in involvement and engagement from Non-Executive Directors (NEDs). This is unanimously regarded a positive within the industry, and we don’t expect this to slow down, especially with personal accountability for specific issues (such as Whistleblowing and Consumer Duty) adding to the responsibilities of SMCR.

However, it is important to make sure that your NEDs maintain their independence and objectivity, and do not stray – inadvertently – into a more executive role. Crossing that line into executive territory challenges the independence and objectivity of the NED role but could also be perceived to show a lack of confidence in the executive committee. Unsurprisingly, this is particularly prevalent with new NEDs. Robust training and onboarding can help mitigate this risk, ensuring NEDs confidently understand the nature of their new role. 

Moreover, governance teams and executives need to work hard to ensure that board members receive the right management information, and in a timely manner. Do board members have sufficient time to effectively review this information prior to board? If not, they may attempt to solve the problems, again straying into executive territory.  

It is also important that when you present your Board report, it is supported by clear and robust customer-centric challenge and ensure that you can actively demonstrate the engagement and discussion that takes place. Ensuring that your board members – and in particular your chair and board champion – are positioned to create a constructive environment for discussion will add credence and support the premise that Consumer Duty is embedded across the organisation. 

Get in touch

If you would like to discuss the contents of your Board Report, the lessons you have learned in preparing the document, or how you can improve your ongoing monitoring and preparation for next year’s assessment of Consumer Duty, please do get in touch.