Consumer Duty Board Reporting: What to do

It’s that time of year when compliance professionals are pulling together their consumer duty board reports. The reports bring together of a year’s worth of work surrounding the duty, specifically outcomes monitoring data.  This article walks you through the FCA’s expectations in relation to the Board Report, providing guidance on building yours.

Annual board reports are now a central mechanism for demonstrating compliance with the duty. The FCA have already reviewed hundreds of them, highlighting what good looks like and where firms are struggling. From a regulatory risk perspective, it is therefore imperative that your report meets regulatory requirements.

What the FCA Expects

The FCA requires firms to prepare an annual Consumer Duty report for their board, setting out:

• The results of monitoring customer outcomes

• Any actions taken or required to address poor outcomes

• Whether the firm’s business strategy remains consistent with the Duty

• Whether the board is satisfied that the firm is complying with its obligations

The latter point is the least important, which is a mistake many have made in their previous iterations of the report. The focus needs to be on whether customers are receiving good outcomes, rather than whether the firm is undertaking the steps it should take to comply with the Duty – technical compliance with the Duty does not guarantee good outcomes.

The regulator has emphasised that the best reports are outcomes‑focused and supported by high‑quality data. The hard work is to reach this point: it requires your team to undertake key fundamental thinking, identifying what good looks like, ideally for each group of customers served by your firm. This step, like all steps, should be agreed by senior management, with appropriate challenge evidenced.

The next step is to identify the data which tells you whether the good outcome is happening. If, for example, a good outcome is the customer understanding the product bought, you may look at early switching, complaints and even query data to identify whether the good outcome has been achieved. This is where good quality data helps, the ability to segment data to identify such outcome metrics.

The FCA also has opinions about the form and content of the report, highlighting the need to include outcomes data in a way which enables transparency about risks and actions.

How to Build the Report

Step 1: A bit of a sales pitch here, but if you have yet to start your journey, an excellent starting point is to download our template. This provides you with a base structure of the report, together with guidance for each section which, if followed, ensures the report includes the information required. You can see our report here: Consumer Duty Templates | RB Compliance Consultancy

Step 2: Establish responsibilities, defining ownership, those responsible for compiling the reports, and governance (who reviews the draft and how challenge is recorded and actions tracked). These responsibilities are important as they enable you to set the methodology you use to create the report.

Step 3: Agree contents. The relevant committee should (perhaps using our template!) identify the proposed contents of the report, share these with the Board for their review, challenge and agree. The feedback from the FCA has been clear, the first time the Board see the report should not be in the Board meeting where it is formally reviewed, instead, they should oversee the process of building it.

Step 4: Gather and validate relevant information: a robust report is built on reliable data. Firms should collect a range of data including outcomes monitoring MI (complaints, product performance, customer support metrics, distribution chain insights), customer segmentation analysis (vulnerable customers, different product cohorts, demographic groups), product governance outputs, and root cause analysis as well as frontline feedback and qualitative insights. It is equally important to create a framework whereby the accuracy of the data is validated; most of our clients are taking a two lines approach. As an aside, a quick overview of this validation can be included in the final report as it is excellent evidence should the regulator review your report.

Step 5: Compile the report: bring the data into the draft of the report, considering the methods of presenting the range of data in the most meaningful way. Some elements will be best presented via RAG style dashboard reporting, others may be most informative via graphs or charts or by a written analysis. The FCA love to see a mix and value recorded rationale.

Step 6: Sneak preview: give the draft report to the Board, allow them to ask questions as these will likely highlight where further information or analysis would benefit the final submission – remember that the first time the Board see the report should not be in the meeting. In fact the meeting is likely to simply be a sign-off of a period of work (certainly the best way to see the review of the report is a process over time, rather than a one-off event).

Step 7: Amend the report based on the Board’s feedback and overlay FCA communications and focus areas – your report should focus on the areas of FCA concern, many of which can be found in their Regulatory Priorities Reports.

Step 8: Produce the final version, discuss and agree the steps that can be taken to improve customer outcomes, the firm’s culture and reflect on your business strategy.  

Note: At any point in the above process, you may want an independent review to ensure you’re on the right track. If so feel free to reach out to me: robert.bell@rbcompliance.co.uk