It is now expected that firms comply for all products in open books by end of July 2023 and July 2024 for those in closed books. By end of October this year, firms are expected to have their implementation plans agreed by their boards.

A key feature of the Consumer Duty is that it is an Outcome-Based Regulation (OBR) – and hence does not dictate a prescribed end state that firms should achieve. This makes implementation planning significantly more challenging.

To help firms get started, we believe a solid implementation plan should focus on four key elements.

1 – Definition of the target end state as an input to the gap assessment

Usually, the first step to regulatory change is to conduct a gap assessment. However, with an OBR this isn’t feasible as there is no target state to assess the gap against. Therefore, at least a high-level target state has to be defined first.

To define this, firms should consider the four outcomes the Consumer Duty advocates and define how they will, for each of them, measure, disclose and test.

All three elements need to be considered together in order to create a comprehensive view of the target state, which will in turn allow firms to conduct their gap assessment. This is especially pertinent where firms don’t have a portfolio view of change.

2 – A focus on evidencing outcomes

A core aspect of any OBR is the need to document and evidence how the outcomes are met. Given this fundamentally different approach to regulation, firms should ensure they use a top-down approach to identifying what data they need to measure these outcomes. For example, rather than asking “what insights can I gain from the data I already collect?” firms should think about “what datapoints do I need to measure the outcomes?”. This should be done consistently right down to the level of detailed customer journey maps.

3 – Considering governance central to how all the elements of consumer duty come together

The FCA has been clear about the importance of appropriate governance – especially through the introduction of a new Principle. Any implementation plan should consider the many aspects of this focus. We believe this will require changes to four parts:

• Direct Senior Management & Certification Regime (SMCR) framework changes (Job Descriptions, Statement of Responsibilities and the Management Responsibility Map) to ensure responsibility is appropriately embedded, including changes to the Reasonable Steps framework
• Changes to the overall governance structure to ensure the right information to evidence addressing the outcomes flows through the organisation and is being used to change and drive better behaviour
• Changes to supporting processes and procedures
• Finally, thorough consideration of how the change will be driven – both top-down and bottom-up.

4 – Remediating products and services to meet the enhanced standards

Given the timelines for implementation, remediating products and services will be an ambitious ask for many firms. The FCA has indicated in its guidance that it does expect firms to take a risk-based approach and accepts that full remediation is unlikely.

Any informed risk-based approach should start with a fair value assessment using the metrics defined during the target state definition. The assessment will highlight any products or services not meeting the appropriate thresholds and provide a book of work for remediation.

In conclusion, it is clear that the scale of change is significant and the timelines tight. The nature of the OBR only makes it more difficult to have a targeted programme from day one. Therefore, it is advisable to kick-off the target state definition first to inform the gap assessment at the earliest. And to take your technology teams and/or providers in the data space along from the start as firms will rely heavily on them to drive the right insights to quantify the outcomes.