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Collating Management Information is the biggest Challenge in ‘Treating Customers Fairly’ Initiative

New research from Cazalet Consulting supported by Actuate reveals the burden of bringing together data to get ‘one version of the truth’ to underpin the TCF principle

Actuate Corporation (NASDAQ: ACTU), the world leader in Enterprise Reporting and Performance Management Applications that empower 100% of users to achieve breakthrough corporate performance, has today released the results of its recent investigation into the issues facing retail financial services organisations in relation to management information (MI) and their responsibilities under Treating Customers Fairly (TCF). The TCF initiative was introduced by the Financial Services Authority (FSA) and its aim is for firms to put customers at the heart of their business, to help build consumer confidence in the financial services industry.

At the BBA conference on July 19th, Sarah Wilson, director of the FSA gave an update on the progress of the TCF initiative. She concluded that In order to encourage the minority of firms that are lagging behind to move more quickly, a deadline of no later than March 2007 has been set by which time it expects all firms to be implementing TCF in a substantive part of their business.

There is an increasing need for management to collate and monitor information to identify whether their customers are being treated fairly and it is this aspect of TCF’s progress that Cazalet Consulting’s research focuses on. Qualitative research was conducted in face-to-face or telephone interviews with key personnel from large financial services organisations who have responsibility for ensuring that their business is meeting the TCF principle. Interviewees were either board members, or managers with responsibilities in relation to TCF and the interviewees represented companies that were all significant players in the financial services market and between them utilise the full spectrum of distribution channels, including intermediary, direct sales, bank branch networks and direct response marketing. This research was concluded in June 2006.

Vincent De Gennaro is VP of EMEA at Actuate and is driving research into TCF and other initiatives that directly affect financial services companies. These activities further confirm Actuate’s position as the acknowledged thought-leader in defining the future of enterprise reporting and analytic technologies in the financial services market. “This research conducted by Cazalet Consulting gives us valuable insight into the management information issues being faced by our clients and prospective clients in relation to TCF and is tremendously helpful to Actuate in anticipating and meeting market needs.” Vincent continues, “We have a significant share of the financial services market with 9 out of the top 10 US banks already committed to our enterprise reporting platform. So we will continue to invest in high quality research to truly understand and thus respond directly to the emerging market needs.”

All interviewees agreed that TCF was an important area alluding to it being a regular item on board agendas, and all have seconded staff onto projects to specifically address TCF. At a high level, all companies interviewed have adopted a similar approach to TCF involving four key stages;
1. Identifying what TCF means to the organisation;
2. Conducting a gap analysis;
3. Developing and working to an action plan to close the gaps;
4. Identifying measures and supporting management information (“MI”) for operational use and board use.

All companies interviewed had completed stages 1 and 2 and were working on stage 3. Few had really done any significant work in relation to stage 4. Interviewees were asked how MI is disseminated within their organisations, how responsibility is assigned for assessing and interpreting MI and, finally, how organisations ensure that appropriate action is taken based on the findings. A number of challenges were identified by the participating companies in preparing and using MI and these included; bringing together data to tell a story; converting data into useful, meaningful information; manual compilation of data often from different sources; data that is diverse and has many sources and making MI easily accessible “at the push of a button”.

Ned Cazalet is managing director of Cazalet Consulting and a former advisor to the House of Commons Treasury Committee. "As the FSA has emphasised, management information is a key tool for regulated firms in ensuring effective implementation of TCF policies and practices. In order for firms to properly and fully comply with their responsibilities in connection with TCF, it is essential that they identify the appropriate level of TCF MI for their business and then undertake meaningful analysis. Accordingly, it is critical that MI systems are firmly underpinned by an effective reporting strategy.” Ned continues, “Taking previous statements made by the FSA together with the findings of our investigation gleaned from discussions with a number of major retail-oriented financial institutions, it is clear that there is a need for firms to deploy an MI reporting and analytics solution that is not only sophisticated enough to meet the various and complex demands imposed by TCF, but also is flexible and capable of being easily adopted right across the firm. This MI reporting and analytics solution should serve not just as a compliance fix, but also be used by enlightened senior managers to reduce operational risk (and, thereby, potentially reduce the firm's regulatory capital requirement and/or the cost of capital), enhance the quality of existing distributor and end-customer relationships, and maximise the value embedded within the business."