Navigating the first Consumer Duty Board Report and beyond - Davies

Sionic has become Davies Learn More

Navigating the first Consumer Duty Board Report and beyond

Crafting Your Consumer Duty Board Report: Key Elements and Practical Tips

FCA-regulated organisations are due to submit their Consumer Duty Board Reports by 31 July 2024. This coincides with the rules coming into force for closed products.

The Board Report is no ordinary document – it’s a roadmap guiding firms toward a future of transparency, fairness, and unwavering commitment to their customers. However, there’s no set template provided. So, what should this report cover? Here, we’ll explore a proposed structure, consider the importance of robust data and management information (MI), and share practical tips for Boards as they receive, and act upon, their Consumer Duty Board Report.

Charting the waters: Understanding the purpose of the board report

The Consumer Duty Board Report serves as a critical communication tool for firms. Its purpose, as noted by the FCA rules, is to summarise monitoring activities and the resulting actions taken during a specific period. By doing so, it provides transparency and accountability to the governing body. Let’s briefly explore these two key elements:

  1. Monitoring results: The report outlines the outcomes of ongoing monitoring efforts. It highlights areas where the firm excels and identifies potential gaps or challenges.
  2. Actions required: Any necessary actions resulting from monitoring findings are clearly articulated. These actions may involve improving customer outcomes, compliance with obligations, or aligning business strategies.

There is no prescribed format for the Board report, but firms should be proportionate and be prepared to adapt their reporting style and content to match the key actions identified throughout the year. Accordingly, to ensure effective reporting, a robust Consumer Duty Board Report must prioritise transparency, accuracy and flexibility.

Be prepared – establishing a framework for success!

To effectively demonstrate their commitment to the FCA’s long-term Consumer Duty, firms should establish a documented framework for their Consumer Duty Board Report. This framework should address the following key areas to demonstrate good practice in governance and management information (MI):

  1. Establish a clear and actionable ownership structure.
    • Clarity is key: Define roles and responsibilities for every stakeholder contributing to the report, including the information and data they need to provide. Determine who is responsible for monitoring the progress of each action item and ensuring deadlines are met. Also, the firm should have considered who will own and is accountable for producing the report. This avoids confusion and ensures everyone contributes effectively.
    • Actionable timelines: Set clear deadlines for data collection, report contributions, and feedback loops. This ensures timely report completion and avoids last-minute scrambling.
  2. Evidence-based insights:
    • Metrics matter: Ensure all statements and conclusions are backed by verifiable evidence, with clearly defined thresholds for KPIs and KRIs based on your firm’s risk appetite, to identify acceptable performance and trigger points for corrective action. To avoid overreliance on lagging indicators, the firm should also develop leading indicators that provide early warnings of potential course deviations.
    • Data, not drama: Collect and analyse relevant data from different departments to support your report’s claims. Ensure data accuracy and avoid making unsubstantiated statements.
  3. Proactive monitoring & continuous improvement
    • Move beyond reactive data collection: Implement a system for active monitoring of MI to identify potential risks and future harms. Regularly analyse data from this monitoring to achieve two key goals:
      1. Identify Knowledge Gaps by pinpointing areas where further MI or data is required to enhance monitoring and provide robust evidence for decision-making.
      2. Drive Improvement to continuously identify opportunities to improve consumer-centric practices based on your findings.
    • Tailor Monitoring Strategies: This is not a “one-size-fits-all” approach. The framework should allow for tailored monitoring strategies of the outcomes, considering the specific needs and vulnerabilities of various customer segments.
  4. Streamline data collection
    • Align data to the Board Report’s needs: Map information requirements to readily available internal and external data sources. This approach identifies any potential gaps and ensures the report truly reflects the firm’s performance in delivering desired consumer outcomes.
    • Ensure high-quality MI: It is key for MI to be complete, accurate, and timely. Where appropriate firms should consider using technology to streamline data collection and reporting processes. This can save time and resources while ensuring timely data availability.
    • Accessibility is key: Ensure the data and metrics used in the report are easily accessible to relevant stakeholders throughout the organisation. This fosters informed decision-making, transparency, and collaboration across the organisation.
  5. Build Board buy-in
    • Executive ownership: Secure the active involvement of senior management, including the designated Consumer Duty Champion at the board level. This demonstrates a strong commitment from the top and ensures consumer needs are embedded in all business decisions.
    • Regular reporting & discussion: Actively engage the board through the production of the report, to encourage discussion on the MI and its implications on consumer outcomes. Presenting key findings from the Consumer Duty framework activities and report, will foster active dialogue, and strategic decision-making.

Plotting the course – building the Board Report

When preparing a Consumer Duty Board Report, it’s essential to follow a structured approach which should also translate into the framework of the report:

  • Board assessment summary: This section provides a clear overview of how the firm is meeting the Consumer Duty, including key takeaways, and identified areas for improvement. It should culminate in Board approval, aligning with FCA requirements and demonstrate how the Consumer Duty integrates with the firm’s overall business strategy.
  • Champion’s view & objective assessment: The designated Consumer Duty Champion offers a concise update on the firm’s current compliance status, implementation progress, and planned enhancements. It should also include any Compliance, Risk or Audit assurance findings and highlight where it supports the results from the report. Building upon this perspective, the report should present a clear and objective evaluation of adherence to Consumer Duty rules. Any identified shortcomings are addressed directly, along with a concrete action plan for improvement. This combined view highlights leadership commitment and a data-driven approach to continuous improvement.
  • Summary of monitoring approach: This section outlines the goals of the monitoring program, emphasising the approach with delivering good consumer outcomes, fair treatment, and high standards of care. It should also explain how this program has been embedded and cover the outcomes, cross cutting rule and adherence to the overarching Consumer Duty principle. This demonstrates a commitment to proactive monitoring, allowing for continuous improvement and ensuring consumer well-being remains central to all practices.
  • Outline results of monitoring: This provides analysis of key MI to assess the firm’s performance against its Consumer Duty KPIs, including explanations for identified trends, the root causes of poor outcomes and how the firm will be addressing any areas where data is limited. The overall analysis highlights strengths and opportunities for improvement, ensuring all aspects of the Duty, including desired consumer outcomes and adherence to principles, are continuously monitored and addressed.
  • Remedial actions: This section highlights specific risks identified through ongoing monitoring. It details the actions already taken or planned to address these risks, including any ongoing remediation or escalation. This proactive approach demonstrates the firm’s commitment to mitigating potential harm and ensuring sustained compliance with the Consumer Duty.
  • Impact on future business strategy: This provides an evaluation of any necessary changes or updates to ensure the firm’s strategy aligns seamlessly with their obligations under the Duty.

Docking at the harbour: finalising your Consumer Duty Board Report

If not already done so, Boards should have scheduled a dedicated board meeting to present the draft report, fostering open discussion and feedback. This collaborative approach ensures the report accurately reflects the firm’s commitment to consumer well-being. All board input should be carefully considered and the report revised accordingly. Ensure the final version meets all FCA expectations and adheres to the July 31st 2024 deadline. Remember, this report is not an attestation but an important part of internal governance. It must be made available to the FCA upon request (including the underlying supporting documentation) and will be required to be produced annually going forward.

The Consumer Duty Board Report is more than just a checkbox for regulatory compliance. It’s a strategic opportunity to showcase your firm’s dedication to delivering positive consumer outcomes. By presenting a well-structured and insightful report, you solidify a foundation for long-term success built on consumer trust and satisfaction.

At Davies Consulting, we can help you navigate through the intricacies of consumer duty reporting. If you have any questions or require Consumer Duty support, feel free to get in touch with Patricia Celata below.

Meet the Author

Patricia Celata

Principal Consultant

Asset & Wealth Management

I have expertise in risk management and regulation, predominately in the wealth management and banking sectors.

Explore more blogs

Asset & Wealth Management

What does it take to deliver Data Governance excellence?

Exploring best practices in data governance, emphasising a federated model, executive buy-in, and a data-centric culture

Asset & Wealth Management

Is “traditional” Data Governance failing?

Exploring the limits of traditional data governance

Asset & Wealth Management

The evolution of Asset Liability Management and the operational challenges it faces today

Exploring the Evolution and Challenges of Asset Liability Management: Navigating the Shifts in Economic Conditions and Implementing Solutions for Today's Complex Financial Landscape