The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

One may ask how scenario planning software can help?

Whilst Consumer Duty rules focus on ensuring customers are receiving ‘good outcomes’, a lot of the focus, quite rightly, has been on the customer experience and fair value.

For a bank to determine fair value, it needs to have the ability to quickly create ‘what if’ scenarios to compare and understand the impact of customer outcomes on the pricing of its products and ascertain fair values. Fundamentally, this helps keep the customer at the centre of the bank’s decision making process. It allows a bank to consider the value of customer loyalty and how it can return that loyalty to its customers, For example, by way of providing better interest rates for its customers.

This analysis and decision making should not be isolated from the core balance sheet. How much more risk is involved? Does it need more or less capital or liquidity? How much more capital/liquidity is required? Banks should be considering the impact of these decisions at a strategic level and analysing the impacts on its key ratios. 

Data is powerful and creating insights on present and future scenarios is essential to determine the current and future landscape. This insight can be used to make more informed decisions for all stakeholders of the business and the society. One method of doing this is to understand the impact of changes to key characteristics of data by flexing and understanding the best course of action. A solution that allows an end user to create scenarios, flex drivers based on judgements can help decide the next course of action for the business.

The adoption of dynamic scenario planning with data analytics enhances compliance monitoring and reporting capabilities. By aggregating and analysing customer outcome related data, financial institutions can identify patterns, trends, and potential risks related to consumer duty regulations. This data-driven approach not only strengthens compliance efforts but also enables institutions to provide regulators with accurate and timely reports, showcasing their commitment to transparency and regulatory compliance. This data driven approach also ensures that financial institutions can be agile in their decision-making processes and proactive in the face of a fast paced and changing environment.

Scenario planning software can enable financial  institutions to better navigate and comply with new consumer duty regulations and balance them with a sustainable business model. By harnessing the power of predictive analytics, scenario modelling, and data-driven insights, institutions can proactively adapt to regulatory changes, enhance their compliance frameworks, and uphold the highest standards of consumer protection. In an era where regulatory compliance is non-negotiable, scenario planning software emerges as a strategic ally in meeting and exceeding consumer duty obligations.

Find out more about Board here.