Aptean Respond Remediation Whitepaper: How to Lower Your Risk of Regulatory Intervention (UK)

Remediation: How to Lower Your Risk of Regulatory Intervention

Steve

Why are we telling you this?

Because your mistakes don’t always define you. What you do afterwards can have a much bigger impact.

As a financial services company, you have a legal and moral responsibility to treat customers fairly. When something goes wrong, you must acknowledge the problem and provide a resolution - to hundreds (even thousands) of people.

And industry regulators are watching your response.

As legislation tightens around duty of care, many firms are using remediation to manage incidents and get customers back to a compliant position. But if your remediation process isn’t up to scratch, you could face further investigation.

This playbook will give your remediation programme a strategic edge using step-by-step techniques to significantly lower your risk of regulatory intervention and strengthen your compliance standing.

Muhammed Ali lost five fights.

Jobs got fired from Apple for arguing with CEO John Sculley. Jimi Hendrix was asked to leave Little Richard’s backing band for being late.

Remediation Programmes are in the Spotlight

The way financial services companies treat consumers is under greater scrutiny. New guidelines and expectations have raised the bar on customer care and due diligence, including:

› Consumer Duty: Financial Conduct Authority (FCA) guidelines introduced in July 2023 require companies to prove they are acting fairly and delivering good customer outcomes.

› Borrowers in Financial Difficulty (BiFD): regulators are cracking down on irresponsible lending after FCA research found only 30% of firms sufficiently explored customers’ circumstances when drawing up repayment plans for financial products and services arranged during the COVID-19 pandemic.

› Affordability: BiFD findings have put general affordability checks under the microscope too. Around 700,000 UK households missed rent or mortgage payments in May 2023 due to the cost of living crisis. Meanwhile, ONS data has found that a quarter of UK adults are currently experiencing financial vulnerability.

› Defined Benefit Pension Transfers: The Pensions Regulator and the FCA are paying close attention to consumers transferring their final salary pension scheme into defined contribution pensions, as only 36% claim to have discussed the move with a financial adviser.

› Know Your Customer (KYC): general updates to financial regulations are forcing firms to carry out regular KYC checks to reassess customer risk and meet antimoney laundering best practices.

Falling foul of these frameworks could plunge your business into troubled waters. You risk financial penalties, legal consequences, reputational damage, operational disruption and competitive setbacks.

Do you remember the pain of PPI? That was a one-off project. Your compliance and customer care teams are now dealing with far more pressure on a daily basis. And those with underdeveloped remediation systems are most at risk of FCA intervention.

Now, let’s look play-by-play at how your business can meet rising legal demands without remediation exercises disrupting day-to-day operations.

Play 1: Get Prepared

Reaction times matter in remediation. The quicker you start, the sooner your remediation programme is complete, and you can return to business as usual.

Being well-prepared for a potential remediation exercise will help you trigger action sooner. And it starts with deciding whether an issue requires a remedial response.

Most companies have a compliance or incident team to investigate problems and decide what financial remuneration is required. For example, your team may cross-reference a complaint against your wider customer database to see if it’s an isolated incident or something more fundamental to your business.

Your company may even have a permanent remediation team to manage these tasks.

If remediation is required, you’ll need to assemble a project team—which means deciding whether you want to use internal resources, bring in temporary staff, or outsource work to an agency. However, recruiting external resources takes time and can increase the cost of your remediation exercise.

Even if you’ve got a permanent remediation team, they may not have the bandwidth to manage a major project and continue with business-as-usual tasks. So you may still opt to bring in external resources.

Whatever your setup, it’s essential to consider your remediation process before you’re hit with a significant exercise. Otherwise, you’re starting on the back foot.

Step 1 Goal:

Decide how you’ll deal with remediation projects ahead of time so you’re ready to implement your plan if financial remuneration is required.

Play 2: Collate Your Data

Once you’ve decided how to resource remediation, the next step is collating the correct information to make informed decisions.

Most financial services firms hold a lot of data but it tends to be used for commercial purposes over managing customer outcomes. Now, the balance needs to change.

One of the biggest challenges with remediation exercises is getting all the data you need in one place. Many companies work in silos.

You’ll probably need to source information from multiple systems and documents to produce comprehensive customer records. You may even need to pull in third-party data.

Many companies set up an Excel spreadsheet to consolidate and manage all this disparate data as it’s quick and easy. But while this works well initially, if you manage the entire remediation project via a spreadsheet, the project can become painful further down the line.

For example, manually checking which records are missing information is a time-consuming and errorprone exercise. Equally, if a spreadsheet gets corrupted or accidentally deleted, there are often no backups.

Investing in a dedicated tool for customer remediation is a smarter route to remediation. This is because industrial-strength software can simultaneously drive resolution programmes for hundreds—even thousands—of customers.

Investing in a dedicated remediation tool early on will allow you to upload customer data straight into the system so it’s stored centrally and securely ready for the next step in your remediation exercise.

Step 2 Goal:

Decide how you will gather and store customer data for remediation programmes and whether you need to invest in remediation software to manage information.

Play 3: Define the Process

A central element to meeting new industry regulations is treating customers fairly.

To achieve this, you’ll need to prove to regulatory bodies how you’ve managed the remediation process from start to finish, including how you decided customer outcomes.

Remediation projects can be more complex to coordinate than standard customer complaints. You may need to source additional data to make a balanced decision and there are usually multiple case treatments depending on how customers are affected. For example:

Scenario 1: Case Treatment:

Scenario 2: Case Treatment:

All the data you need to decide the outcome is complete; the case falls outside the scope of remediation.

Scenario 3:

The case is closed with no action taken.

Case Treatment:

Scenario 4:

All the data you need to decide the outcome is complete and there is a clear-cut case for remediation.

Case Treatment:

You compensate the customer and close the case.

All the data you need to decide the outcome is complete, but the customer is high risk—for example, they’re a high net-worth individual,a politician or a celebrity—so mishandling their case could have high-profile consequences.

You double-check their details before deciding whether to compensate the customer and then close the case.

The data you have on file is incomplete, so you need to complete the customer information before proceeding.

You gather the missing information, which leads to one of two outcomes: either the case falls outside the scope of work, or you financially remunerate that customer.

A good remediation process is like assembling a car. By defining a series of steps, you can ensure each component is installed correctly along the production line. But even one mistake could result in a fault with the end product. Automating elements of the process can reduce the chance of manufacturing mistakes–and the situation is no different for remediation programmes.

A dedicated remediation tool automates key components of your case treatments, so you can apply consistent rules and fast-track the easy wins.

The bigger the remediation exercise, the more value automation adds. It’s almost impossible to manually manage thousands of customer records without making significant errors. Plus, your company may be running several remuneration projects simultaneously.

Step 3 Goal:

Create case treatments and choose a system for applying them to keep remediation projects moving at pace.

Play 4: Take Remedial Action

Once you’ve defined the process for processing case treatments, the next step is managing your response. As we’ve already mentioned, many remediation exercises require a set of responses depending on how the customer has been affected. For example:

› Tiered compensation schemes (based on how severely a customer was impacted by an error or the level of risk to their account)

› Personalised customer letters detailing the issue and level of compensation (for example, recrediting interest that was wrongly applied)

› Branding letters differently (if your products or services were sold both directly and through intermediaries)

Managing these responses via a spreadsheet is possible, but serious mistakes could occur that severely impact project progress. For example, version control issues could mean team members are working from outdated versions of the spreadsheet.

Remediation software can help you take quicker and more effective action by:

› Managing scope creep: if boundaries change as exercises evolve, customers who were initially out of scope could be eligible for compensation. Your software can automatically highlight who these customers are to reduce your risk of non-compliance.

› Integrating critical information: if you’re using an online settlement calculator to determine how much compensation each customer should receive, remediation software can incorporate this data into personalised letters. It’s quicker and more cost-effective to produce communications this way, and it prevents the type of errors that occur when you’re integrating information from a spreadsheet.

› Ensuring consistent action: if every case is manually reviewed, there may be discrepancies in the outcome. Remediation software allows you to implement system controls for a consistently fair response.

› Improving quality assurance: some remediation software can select cases to be reviewed by a quality assessor based on the case handler’s skills and competencies.

Of course, automation can’t fully substitute human input. In a complex case, no system can match the knowledge and judgement of a skilled person. But digitising your remediation process will mean that your team only deals with cases that need further input.

Step 4 Goal:

Choose a system that allows you to compensate each customer appropriately but is easy to control and coordinate consistently.

Play 5: Monitor and Control Progress

Regulators aren’t the only people pressuring remediation teams for transparency. Within your company, senior leaders and board members will want to know how efficiently issues are being dealt with and how quickly you can return to business as usual.

If you’re running remediation projects using a spreadsheet, it’s not easy to view the status of each case or see how close you are to completing the entire exercise. You need real-time insights to monitor, control and report on your progress.

Management information (MI) is critical to reaching a swift and satisfying resolution in remediation projects. It helps you to identify data gaps and unblock bottlenecks so you can complete the exercise with minimal disruption to your general operations.

The advantage of using remediation software to monitor and control your progress is that up-to-date Production MI data is constantly at your fingertips. As a result, you can:

› Check the percentage of tasks completed

› View and share actions that still need to be taken

› Set and track project KPIs that validate your performance

Displaying this information as easy-to-digest tables and graphs will give your senior leadership team the confidence that you’re working efficiently and legally operating as a financial entity.

Step 5 Goal:

Use real-time data and reporting tools to show everyone in your business that you manage remediation projects efficiently and effectively.

Play 6: Stay Accountable

This playbook aims to help you lower the likelihood of regulatory intervention in your customer remediation programmes. And achieving this comes down to one goal: creating a single source of truth.

A well-run remediation exercise is worth very little if you can’t prove you’ve treated customers fairly.

If you’re running the project manually, you can save your spreadsheets on the server as evidence, but how secure are those files? Is Excel the safest place to be storing sensitive customer information?

Without password protection, spreadsheets aren’t GDPR compliant; someone could easily edit the file. Even if they’re encrypted, they can get moved or corrupted. You may also have data spread across multiple files, which must be collated in the event of an audit or investigation.

Nobody wants to be put under the microscope by the regulator. It’s incredibly disruptive to your dayto-day operations, and being found non-compliant can incur a hefty penalty.

Digital remediation tools provide greater security and ensure a trustworthy audit trail is always accessible. If the FCA makes enquiries, your compliance team can provide precise data to prove you’re treating customers fairly.

Step 6 Goal:

Keep a secure, up-to-date digital record of all your remediation projects to minimise your chances of disruptive regulatory investigations and reduce the risk of FCA fines.

Aptean Respond: Your Tool For Lower Risk Remediation

As regulators increase their focus on customer ethics, being able to prove you’ve treated customers fairly is a game-changer.

A dynamic, scalable remediation system will enable your team to quickly and accurately manage cases while reducing the risk of legal intervention.

Aptean Respond Remediation is an industry-grade solution. Our software empowers financial services companies to simplify and improve their remediation process by:

› Securely handle large quantities of customer data

› Automating part or all of the case treatment process

› Automating customer communications and triggering actions from their response

› Accelerating quality control using systemised checking capabilities

› Adapting remediation programmes throughout their lifecycle

› Providing a clear audit trail for industry regulators

Are you ready to improve your remediation programme? Request a free consultation or learn more about Aptean Respond Remediation.

Aptean: Get Ready for What’s Next, Now®

Aptean specialises in providing financial services companies with a “single source of truth” to Get Ready for What’s Next, Now®. Our software suite helps banks, lenders, insurers, utility companies and other financial organisations to operate efficiently and meet changing legislation.

With decades of collective industry experience, our dedicated professionals “speak your language” and understand the specific challenges that financial companies like yours face and how to overcome them best and succeed in a dynamic marketplace.