Will you be Consumer Duty compliant by Monday?

The financial services landscape is about to undergo a significant transformation on the 31st of July with the implementation of the Consumer Duty. These new set of rules, enforced by the Financial Conduct Authority (FCA), will bring higher standards of consumer protection to retail customers, placing their needs at the forefront of all financial interactions.

What is Consumer Duty and why is it important?

The Consumer Duty is a set of regulations that require all firms regulated by the FCA to adhere to higher standards of consumer protection, ensuring that retail customers are treated fairly. This pivotal shift towards customer-centricity aims to rebuild trust and confidence in the financial services industry,

Lets explore the three core aspects of the Consumer Duty and highlight some crucial considerations for firms, particularly those in the risk and resilience space.

This requires firms to act responsibly and diligently to deliver positive outcomes for their clients. This shift in focus aims to build trust and confidence in the financial services industry by ensuring that customer welfare remains the top priority.

The Consumer Duty outlines Four Outcomes that set clear expectations for firms concerning key areas of the customer relationship.

• Products and Services Outcome: Firms must ensure their products and services are designed, approved, and managed with the specific needs of target customer demographics in mind. Incorporating customer feedback throughout the lifecycle is essential, and the FCA may request evidence of customer journeys to ensure customer interests are at the forefront.
• Price and Value Outcome: Firms need to transparently explain and evidence the worth of their products and services. The FCA may conduct spot checks to ensure continual compliance and will assess if the price charged reflects the associated benefits and aligns with the needs of the target market.
• Consumer Understanding: Firms must provide clear and effective communications to help customers make informed decisions. The information should be concise, covering benefits, costs, risks, and necessary actions. Firms must safeguard customers from decisions that may not serve their best interests.
• Consumer Support: Firms must offer a reasonable level of support to customers during IT outages or cyber-attacks. Platforms and support channels should cater to customer needs and be designed to adapt to changing circumstances.

3. The Cross-Cutting Rules: Upholding Overarching Conduct Standards

Underpinning the entire Consumer Duty are the Cross-Cutting Rules, which serve as overarching conduct standards. These rules govern firms while they strive to meet the Four Outcomes, ensuring that the customer's best interests remain central to all operations.

Firms have been working hard to be compliant with these new standards ahead of the deadline and the FCA’s consultancy period provided the opportunity for clarity to be sought and for key considerations to be outlined.

What does this mean for my organisation?

To meet the security and resilience aspects of the Consumer Duty, organisations must take proactive steps to enhance their risk management, cybersecurity measures, and customer support systems. Here are some key actions they should consider:

Conduct Comprehensive Risk Assessment: Organisations need to conduct a thorough risk assessment to identify potential vulnerabilities and risks that could impact their ability to deliver good outcomes for customers. This assessment should include evaluating IT infrastructure, data security, operational processes, and potential external threats.

Strengthen IT Infrastructure and Resilience: Firms should invest in strengthening their IT infrastructure to minimize the risk of IT outages and cyber-attacks. This may involve implementing redundant systems, backup facilities, and disaster recovery plans to ensure uninterrupted customer service.

Provide Customer Support During Incidents: The Consumer Duty requires organisations to provide a reasonable level of support to customers in the event of IT outages or cyber-attacks. This could involve offering alternative support channels, clear communication during incidents, and timely resolution of issues to minimize customer harm.

Enhance Data Governance and Privacy: Data governance is critical to ensuring the fair value of products and services. Organisations should implement robust data security measures to protect customer data from unauthorized access and breaches. Compliance with data protection regulations such as GDPR is essential.

Implement Cybersecurity Best Practices: Firms must adopt industry-leading cybersecurity practices to safeguard customer data and prevent cyber threats. This may involve regular security assessments, employee training on cybersecurity awareness, and advanced threat detection mechanisms.

Develop Incident Response Plans: Organisations should have well-defined incident response plans in place to handle potential cybersecurity incidents or IT outages effectively. These plans should include procedures for identifying, containing, mitigating, and recovering from incidents.

Collaborate and Share Best Practices: Sharing best practices and collaborating with industry peers can be beneficial in strengthening security and resilience measures. Participating in forums, working groups, or industry associations can provide valuable insights and solutions to common challenges.

Regular Testing and Drills: Regular testing of IT infrastructure, incident response plans, and cybersecurity measures is essential to validate their effectiveness. Conducting simulated cyber-attack drills can help identify gaps and improve preparedness.

Emphasize a Culture of Security and Resilience: Creating a culture of security and resilience within the organisation is crucial. This involves promoting awareness, training employees, and embedding security considerations into the organisation's decision-making processes.

By taking these actions, organisations can demonstrate their commitment to meeting the security and resilience aspects of the Consumer Duty. Failure to comply with this new legislation will result in sanctions being imposed by the FCA which could include a fine.

How can I ensure my organisation is compliant?

If you are worried about Consumer Duty and how it can impact your organisation, Toro can be your trusted partner in achieving compliance with the security and resilience aspects of the Consumer Duty. With our comprehensive range of services, we are well-equipped to assist organisations in fortifying their defences and bolstering their resilience.

Our cyber security team can ensure that your IT infrastructure and sensitive data are safeguarded against cyber threats, reducing the risk of potential breaches. Additionally, our cyber essentials and cyber training programs will equip your employees with the necessary skills and knowledge to identify and respond to cyber threats effectively.

We can provide support around Governance, helping to develop robust policies and procedures aligned with the Consumer Duty's requirements, enabling your organisation to demonstrate a strong commitment to customer protection.

We offer risk management support, providing a thorough assessment of potential vulnerabilities, allowing you to proactively address risks that may impact customer outcomes.

In times of crisis, our crisis response services ensure a swift and efficient response to incidents, minimizing harm to customers and your brand reputation.

By leveraging Toro's expertise and tailored solutions, your organisation can confidently navigate the complexities of the Consumer Duty and thrive in an environment of heightened consumer protection standards.

Contact a member of Toro today to talk with one of our experts.