A Pathway to Implementing Consumer Duty in 2023

The FCA expects Consumer Duty compliance by July 2023. Organisations should be in the throws on planning their implementation, which should continue long-term after this specified date to ensure requirements are embedded throughout operations.

Executing these plans will take significant resource, informed analysis, and thorough planning. Implementation plans will be comprised of short-term tasks and longer strategic milestones, all set out in an integrated plan. Organisations need to start putting these plans in place now so they can juggle the time constraints involved, and effectively prioritise their upcoming months.

Here is a short guide to how firms can move forwards with their implementation plans and some advice on where they should focus their efforts.

Step by step guide to implementing Consumer Duty

1. Define good outcomes

Against the expectations set out in Consumer Duty, organisations should define what good outcomes means in the context of their organisation.

2. Map out all in-scope touchpoints

Products, services, customers, communications policies and more. Be aware that this encompasses all data, systems and processes connected to each touchpoint. Map out all relevant items affected by the Consumer Duty and identify which ones need to be assessed, updated, or rewritten. Then perform a gap analysis to identify where policies or procedures for new regulation need to be created.

3. Create a timeline and milestones

Based on a thorough assessment of the above, prioritise actions based on risk level and then create a clear timeline for implementation. Establish milestones with due dates to ensure progress is being tracked and managed.

4. Determine evidencing approach

The FCA noted that many firms have planned to evolve their frameworks based on the outcomes but haven’t clearly outlined key metrics in accordance with the substantive requirements. Organisations should not only include measurable metrics for their changes, but they should outline how they plan to capture, measure and record this data in order to assess performance and inform future actions for improvement.

For example, showing a considered approach to root cause analysis across certain requirements will be fundamental to demonstrating an organisation’s capacity for compliance.

5. Review governance framework for visibility

Assess your tools for tracking activity individual compliance, disseminating governance requirements, and measuring, monitoring, and outputting results of the Duty’s outcomes. Does this provide visibility across the population? Does this enable aggregated reporting on the Consumer Duty framework? Can causation be and responsibility be analysed?

Ensure you have a digital tool/s in place to support the milestones and evidencing objectives you’ve set out to achieve.

6. Agree Ownership/responsible senior manager and operationalise

Firms should assign responsible persons to all relevant tasks, ensuring there is clear accountability for each requirement and an overarching hierarchy of responsibility. Assign each task an owner and ensure these individuals are aware of their duties in operationalising the Consumer Duty. This should be clearly captured and tracked using an appropriate tool.

7. Identify risks

Identifying potential issues or risk areas upfront will empower organisations to mitigate problems. Work to identify risk areas and create a remediation plan for these situations – pay attention to second- and third-party dependents. Also, plan in time for things to change closer to the implementation date and therefore for new areas of risks to arise.

Continue to monitor your implementation progress and identify where things are running behind compared to your timeline and what the consequences of this may be.

8. Define deliverables for assessment

Proactively outline the data, documentation and digital evidence you need for regulatory assessments, in the short term and for future assessments. Use these findings to establish solid digital versioning and digital recording functions so you can start building your digital footprint upfront.

9. Update all procedures

Based on your findings and resultant implementation plan, begin to update procedures both in-person and digitally. Equally, define and organise any new training, certification, or development activity that’s required for your staff.

10. Implement monitoring processes

For firms to truly demonstrate they are committed to providing good outcomes, they must have in a way to monitor their outcomes against the changes they have set out. First, create processes for monitoring and reviewing, then clearly outline how organisations will rectify poor outcomes or address risks identified.

Other advice:

  • Spend time to deeply understand your customers to inform your plan
  • Consider gaining outside perspective to inform your assessments
  • Start with high-level principles and work backwards to operational changes
  • Ensure your frameworks are systemised early for better adoption
  • Extend your implementation timeline beyond July 2023
  • Integration will be key for your data, technology and processes
  • Capture data comprehensively throughout systemisation and implementation
  • Appoint champions to maintain momentum and advocate for changes
  • Establish operating models and governance that can be adapted
  • Remember day one isn’t your complete day; plans will need to be reiterated