{"id":21782,"date":"2023-05-04T06:00:42","date_gmt":"2023-05-04T05:00:42","guid":{"rendered":"https:\/\/davies-group.com\/consulting\/blog\/consumer-duty-formula-for-successful-management-reporting\/"},"modified":"2026-01-22T16:36:54","modified_gmt":"2026-01-22T16:36:54","slug":"consumer-duty-formula-for-successful-management-reporting","status":"publish","type":"blog","link":"https:\/\/davies-group.com\/consulting\/blog\/consumer-duty-formula-for-successful-management-reporting\/","title":{"rendered":"Consumer Duty \u2013 a formula for successful management reporting"},"content":{"rendered":"

The early results of Davies\u2019s Market Insights Survey 2023 on Consumer Duty* indicate that two thirds of firms have found it challenging to develop a management information (MI) framework to satisfy reporting and monitoring expectations. Let\u2019s take a closer look at this.<\/em><\/p>\n

*The full survey results are due to be published in May.\u00a0<\/em><\/p>\n

What does Albert Einstein<\/a>\u2019s theory of\u00a0Special Relativity<\/em><\/a> have in common with management reporting for Consumer Duty? At face value, probably not much. But let\u2019s scratch a little under the surface.<\/p>\n

German-born physicist,\u00a0Albert Einstein<\/a> used a mathematical formula to explain this theory that mass and energy<\/a>\u00a0are the same physical\u00a0entity<\/a>\u00a0and can be changed into each other. Using an equation he demonstrated how an increase in the\u00a0mass<\/a>\u00a0(m<\/em>) of a body, times the\u00a0speed of light<\/a> squared (C2<\/sup>) is equal to the\u00a0kinetic or full energy<\/a>\u00a0(E) of that body or E = MC2<\/sup>. This simple equation changed the world, overturning theories that were centuries old and led to the development of modern physics.<\/p>\n

Turning over attention to Davies\u2019s 2023 Market Insight Survey into Consumer Duty (due to be published later this Spring), we identified that nearly two thirds of firms have found it challenging to develop a management information (MI) framework to satisfy reporting and monitoring expectations.<\/p>\n

If Einstein\u2019s formula was simple and successfully solved a world phenomenon, could we use this formula to solve the management reporting challenge?<\/p>\n

Yes.<\/p>\n

In transposing Einstein\u2019s formula to this context, firms may be able to solve the complexities faced in their MI endeavours. This formula provides principles that can be applied by firms to achieve their potential or \u2018full energy\u2019 in meeting their regulatory obligations and more importantly achieve good customer outcomes.<\/p>\n

Here’s how it works.<\/p>\n

Expected outcomes = Measurement x (Context x Customer outcomes)<\/p>\n

Expected outcomes<\/strong><\/p>\n

In the lead up to previous milestones, firms will have defined what \u2018good’ outcomes look like. These can then be used as the starting point from which the MI framework is designed and as the benchmark against which firms can validate how they are performing in delivering good outcomes to customers.<\/p>\n

The MI framework should consider good outcomes across all target customers, channels of engagement and products and services offered.<\/p>\n

Measurement<\/strong><\/p>\n

Once the expected outcomes are defined, the firm should then turn their attention to how they will ensure these good outcomes are achieved.<\/p>\n

The Financial Conduct Authority<\/a> (FCA) expects firms to monitor and regularly review the outcomes customers are experiencing, which involves defining a framework for collection and reporting MI. Pertinent outputs from the framework include identifying sources of poor outcomes and harm which allow firms to swiftly respond when consumers do not experience the desired outcomes.<\/p>\n

You can only manage what you measure.<\/p>\n

In designing a MI framework, firms need to take into consideration their size, complexity, the nature of their products and services, customer types or characteristics and customer touch points. Firms need to apply the concept of ‘reasonableness’ in configuring their frameworks and overlay that with a risk-based approach. The scope of MI is essential and should span from the firms\u2019 strategy through to detailed processes and the customer journey. Consumer engagement, behavioural and attitudinal metrics provide a broader consideration for good client outcomes.<\/p>\n

Firms are data rich, so there is no need to reinvent the wheel. Understanding what is currently reported and the sources of information used within the firm will propel the efforts in designing a MI framework. A simple gap analysis will provide clarity on where efforts and priorities need to be shifted.<\/p>\n

Applying the firm’s risk appetite and service standards to the MI framework will reduce the \u2018noise\u2019 of too much information and help firms respond to issues with laser focus.<\/p>\n

Current context<\/strong><\/p>\n

Measurement does not exist in isolation. The context in which any MI framework is designed and implemented is critical.<\/p>\n

You need to understand the needs of the firm’s audiences and the level of information that would be most effective for each. The audience will dictate the level of detail required and the frequency in which the information would be received. Governance structures also become important mechanisms for how information is disseminated and consumed.<\/p>\n

Data is available in abundance, both in the structured and unstructured forms. But how is the firm using these data sets as sources of insight? Carefully consider the data quality and reliability, ease of access of information and the frequency of reporting required.<\/p>\n

Framework implementations are not without their challenges. Our market insights survey provided some perspective on the challenges firms are experiencing, these included:<\/p>\n