How to show the FCA you take their key risks seriously

The FCA has recently sent a portfolio letter to personal and commercial lines insurance intermediaries, setting out its view of the key risks that firms could pose to consumers or markets. Tom Wood from our compliance proposition partners UKGI Group, gives his view on areas for consideration and suggests what action to take.

“When the letter was published, we witnessed a lot of negative commentary about the contents and a growing number of firms that we have talked to over the last month have done nothing other than read the letter and put it to one side.

You know the risks. You know you treat your customers fairly. You know that you look after your customers.

We get it.

But the regulator doesn’t necessarily see things the same way and if we step back and look at the letter in more detail, then we can see that it is actually a very helpful guide for your firm.

Think differently

The letter is prompting you to challenge your current thinking and to consider the areas that could be improved – not because your firm is a high risk, but because the FCA’s analysis of the market has thrown up some major considerations that we all need to react to.

The FCA highlighted the following three key risks;

  • Pricing practices and value for money
  • Product oversight and governance
  • Client assets and orderly wind down

They also listed some additional risks for consideration;

  • Diversity and Inclusion and Environmental Social and Governance
  • The Senior Managers’ and Certification Regime
  • Cyber threats and operational resilience
  • Regulatory responsibilities
  • Oversight of Appointed Representatives
  • Post-sale verification
  • Keeping up to date with FCA developments

We have been recommending to all our clients that they take the time to sit down as a senior team and consider the risks one by one, right across the business:

  • Write down and formally document your current processes, thoughts and outcomes to evidence that your firm has taken on board what the FCA has highlighted in its letter
  • If you find gaps in any of these areas, then put together an action plan and give yourself time to put a measurable risk management strategy in place, set a date to work towards and evidence the changes that you make

By acting on the letter rather than leaving it to one side, you will find improvements that can be made which will make your business better and that will ultimately reduce the risk of customer harm. It’s a win win.

You don’t have to manage this alone

The UKGI Group’s businesses have helped hundreds of firms with their regulatory compliance and we have seen evidence of best, good and poor practice. We use this to help our clients improve their regulatory risk management.

Our ‘Key Regulatory Risks Gap Analysis’ service for brokers is designed to help you take action in a way that is structured, challenging and that will provide one-to-one advice from an experienced consultant who can help you discover the gaps that you are missing.

You will receive a workbook to complete and up to two hours meeting online with one of our consultants who will review your answers, provide independent challenge and who will highlight areas of improvement with suggestions for how to close the gaps.

Everything will be documented in a report which can be shown to the FCA as evidence of the work that your firm has done as a result of their letter."

Aviva brokers can access this service for a reduced fee of £375 + VAT (saving 25%).

The Gap Analysis was timely and in line with current FCA regulatory thinking. It highlighted to the firm lots of things that we are doing right, and highlighted areas that need more focus, for example, the product governance and pricing practices!

Broker Client

Contact UKGI Group today for more information

Call them on 0117 244 7221

Email UKGI Group