What is Consumer Duty board reporting?

Under the Financial Conduct Authority’s (FCA) Consumer Duty (the Duty), a company’s board or governing body is required to conduct an annual review. During this review, they should approve an assessment of whether the firm is delivering good outcomes for its customers in line with the Duty. The first report is due by 31 July 2024, which aligns with the same deadline for firms applying the Duty’s principles to closed book products. These are products that were sold to consumers before 31 July 2023.

What are companies required to do?

Companies must assess their data and provide evidence of their customer outcome monitoring to ensure their offerings are meeting the necessary standards. If there’s evidence of poor outcomes for specific consumer groups, or if any group is experiencing worse outcomes than others, it’s crucial to know what actions are being taken. This includes improvements to address any risks or issues and ensuring that their future business strategy aligns with the Duty’s aim of consistently delivering good outcomes.

Companies must document the outcomes in a board report, and in doing so, should consider the following.

• Determine the roles and responsibilities, including second and third lines of defence. How will you seek assurance over the development of the report?
• Identify the Management Information (MI) and other data that will support the report, including outcomes testing. What different sources of data will be used, and how can the board have confidence in the data presented?
• Establish and maintain effective communication between data analysts, Duty Champions, representatives, steering group members, and accountable executives throughout the organisation.
• Ensure there is sufficient time for the data and report to be analysed internally ahead of the 31 July 2024 deadline.

How can we help?

We can support you in implementing the Duty as the 31 July 2024 deadline approaches and continue to support you post-implementation. We can also assess the preparation of your board reports.

Firms must be aware that the FCA may ask for copies of their board reports after the 31 July 2024 deadline. It’s likely these will need to be provided promptly and without delay, so it’s important that firms react quickly to these requests.

What to consider when preparing your board report

Executive summary:

• brief overview of the Consumer Duty status since implementation;
• highlight key achievements, challenges and any significant incidents; and
• explain how the business strategy is aligned with its obligations under Principle 12 and PRIN 2A.

Culture and purpose:

• evidence of the alignment of culture and purpose to the Duty, including factors such as changes to remuneration, rewards and incentive schemes, and Consumer Duty training.

Customer outcome monitoring (main section of the report):

• summarise business products and services;
• consider the customer journey mapping exercises and appropriateness of any outcomes testing; and
• outline the general approach to vulnerable customers and how they have been impacted by the Duty.

First line oversight:

• highlight the key risks/areas of concern identified since the Duty’s implementation and the respective actions taken to mitigate those risks; and
• include an action log with a RAG (Red, Amber, Green) rating, root cause analysis, and action owners.

Second line oversight:

• highlight any second and third-line oversight activities that have been undertaken, as well as any monitoring reviews that have been or are planned to be undertaken; and
• overall view of the strength of the risk and compliance (second line of defence) function since the Duty's implementation.

Alignment to business strategy:

• outline how the business strategy has aligned with the Duty since implementation, and what future changes (if any) are required to remain aligned.

Board approval:

The board is required to review the detail contained within the report, and as part of this:

• review and approve the report of customer outcomes, including the actions taken;
• confirm it is satisfied that the firm is complying with the Duty; and
• assess whether the firm’s business strategy complies with the Duty under Principle 12 and PRIN 2A.

What else to consider:

• where will accountability and ownership lie for the process of producing the report?
• how are firms planning for the development of the report, eg in high-level project plans?
• how does the firm’s culture and strategy align with the Duty’s principles?
• how are vulnerable customers being considered in the context of the report?
• are the four outcomes of the Duty considered within the report design?
• what is the role of the board’s Consumer Duty Champion in relation to the board report?
• are governance roles and responsibilities at board level updated to reflect the board’s and other governance forums’ responsibilities concerning the report? Are agendas and meeting minutes adequately documented to reflect the discharge of roles and responsibilities?

For more info on Consumer board reporting, contact Zoe Morton or Paul Jennings.