The Financial Services Specialists

December's Queen's Speech highlighted the focus on the principles of Treating Customers Fairly (TCF) despite the economic issues facing the financial services sector. With many firms already labouring to demonstrate compliance (in March 87% of the firms tested failed the MI and Governance deadline) this further scrutiny and the potential for substantial fines, increases the pressure on the industry.

he next hurdle is for firms to demonstrate that TCF has been fully embedded in their organisation by the end of this month (December 08). After a period of considering the requirements and implications of a TCF focused business, the implementation of profound changes have naturally proved difficult. Research and experience indicates that cultural change does not occur over short periods but requires long term and sustained effort. The FSA expects 20% of large firms to fail the December deadline and that failure will result in fines being applied and /or more frequent ARROW visits by the FSA.

Feedback from Bluerock clients indicates that there are three main areas of concern:

• The Management Information (MI) and Governance challenged firms to define the requisite amount of information needed. Some failed due to insufficient and inaccurate information while others had too much information leading to unclear decision making.

• Embedding the Culture Framework requires businesses to demonstrate that the appropriate cultural attributes are in place, but how to turn intangible indicators into measurable actions is problematic.

• Sustainability, TCF must become a feature of day to day life. For this to happen, it must be fully integrated into all aspects of operations and business life but in often diverse, complex and clearly service based businesses the challenge is to make this systemic and engrained.

Ultimately the ‘organisational DNA' needs to evolve to ensure that TCF is engrained. What this means in practice is that all employees at every level automatically works according to TCF principles. This requires long term change that will continue beyond December.
Bluerock has developed and tested an approach that quickly and efficiently helps firms in the areas of MI & Governance remediation; embedding TCF culture and practices and making TCF sustainable and the requirement to demonstrate compliance.

MI & Governance Model

One of the principle problems for delivering relevant MI is establishing a clear line of sight from the MI back to the outcomes. Using our proven model we can quickly assess the appropriateness and accuracy of the available information and if necessary define an appropriate set of MI for each business. We are then able to check completeness, appropriateness and accuracy / consistency of the information and how it is being applied through the governance framework of the business. The output from this review is a Deviation Report, which details where the MI and Governance do not align with the outcomes, any outcomes that are insufficiently evidenced, and what action is required to resolve these gaps.
Embedding Assessment; a framework of tests. Key to embedding is the ability to change intangibles into measureable actions. The degree to which this is still required depends upon the current state of the organisations processes.

Bluerock's rapid assessment approach establishes which of three levels of testing, is required according to the scale of a particular problem.

A. Risk Based Audit. This is a baseline check to ensure that you are on track. The output from this test will be a checklist report identifying gaps and high level recommendations

B. Business Scenario Testing. This is appropriate for those with a small number of areas of concern, needing to understand the extent of the problem. We apply a range of scenarios from simple to ‘soap opera', providing you with a detailed set of test plans and expected results, to create a status report aligned to outcomes and the culture framework

C. Model Office. If you are in a situation where you are unlikely to meet the December deadline, and / or have an insufficient or inadequate test strategy and need to pre-empt an FSA criticism, this approach provides a comprehensive test and remediation lab. This includes a full set of tests which spans all areas of the organisation. Scenario based, it employs a variety of testing methods. The results are included in a detailed report highlighting problem areas, evidence of failures and recommendations for how to resolve. This is a complex and large scale commitment and should not be attempted for the December deadline, but instead can provide support for any pre-emptive and ongoing progress reports to the FSA

The tests can be structured so that they can either be stand-alone focusing on one key aspect of TCF, or a single business function, or can be integrated to encompass multiple areas of the business.

Sustainability; beyond December

• Governance alignment
  Our governance alignment work addresses inefficiencies that have come about as a result of adding TCF MI into existing reporting and decision making structures. Our ‘wiring diagnostic' tracks all information through its lifecycle, mapping decision making processes and outcomes. Our work with clients in this area has highlighted key decision making gaps and provided the following additional benefits;
  - Rationalisation of MI
  - Elimination of duplicate or redundant forums and other ad hoc / standing meetings
  - Creation of cheaper, better and faster decision making processes
  - Alignment of TCF interests to other corporate imperatives and the resolution of conflicts between them

• Building continuous improvement
  Continuous improvement provides mechanisms that allow you to incorporate dynamic change in to your organisation, helping the embedding and communication programme. This provides a solution for the long term ensuring the evolution and improvement of TCF practices within a business. Bluerock uses a hosted tool to facilitate the development and communication of the TCF principles by creating an online "TCF Operating Manual" for each specific business.

Bluerock appreciates that each organisation has its own approach and issues relating to the implementation of TCF and that there is no "one size fits all" solution. The approaches that we have developed are designed to provide a rapid but accurate assessment of the areas that need attention. In order to get a high level view of the issues Bluerock is offering a one day diagnostic workshop with key members of your organisation. We will work with you to structure the workshop, brief participants and plan the information and inputs required. The result is a clear view of the most pressing problem(s) to be addressed in your TCF work, and the relevant approach by which to address it.