What are the implications of the FCA’s business plan?

As well as the extension of the Senior Managers and Certification Regime to all authorised firms, there are also interesting references to the “purpose” of financial services firms and around the concept of customer “harm”:

• Firms should therefore be reflecting and asking themselves critical questions on what their “purpose” is, what customer needs they serve, how they fulfil these and also how they monitor them.
• They should also think about where consumer “harm” could be more likely or risky in their organisations and be able to articulate how they both understand and manage this when asked. Particular areas of relevance include product governance, outsourcing, and business model impacts on customer behaviour.

More broadly, operational resilience is a key theme of the Financial Conduct Authority's 2019-20 business p;an. This includes outsourcing, use of third parties, change management, cyber security and resilience.

It is very interesting that 17 per cent of the incidents firms report were caused by an IT failure at a third party supplier – the second highest root cause of disruption (the highest being IT and new system deployments/upgrades).

Unsurprisingly the business plan notes that firms, consumers and the markets have weathered a considerable period of Brexit-related uncertainty.

Fair existing customer treatment is also called out – e.g. whether existing customers could be getting “penalised” for their loyalty. This issue presents itself across different areas – from insurance policies to savings accounts.

It is also particularly relevant in the context of vulnerable customers and customer resilience.

Going forward, the FCA notes “longer term” priorities include innovation, data and changing customer demographics.

While these are all very relevant areas, there is always a risk of how well focused reviews in these areas will be. So future clarity around the scope and outcomes of these reviews is very important, as is understanding customers that could be more vulnerable and changing practices as needed.

Brexit, Mifid and duty of care

Unsurprisingly the business plan notes that firms, consumers and the markets have weathered a considerable period of Brexit-related uncertainty.

With UK politicians still unable to reach a consensus on what terms the UK should leave the EU, the FCA notes that Brexit will “no doubt continue to place considerable demands on us”.

To that end the FCA has identified total funding for EU withdrawal to be around £22m for 2019-20, although this may change depending on what form Brexit takes.