Conduct Risk and associated remediation already command a significant amount of Board‑level attention; two factors could drive them even higher up the agenda over the next twelve months:

1. Remediation volume

The volume of remediation activity is likely to increase from already high levels. Potential mis-selling issues continue to surface, with tracker mortgages mis-selling still being addressed by many Banks, over-charging issues across multiple different product types, cost of credit issues, questions of mis-selling in the investment market, to questionable pricing strategies in the car and home insurance market now on the horizon. In addition, many firms are experiencing challenges with legacy systems and fixing issues of the past due to poor technology and legacy practices.

We also expect to see a significant volume of remediation relating to service failures, driven in part by the increasing levels of migration to a digital customer experience and concerns about the suitability of products issued at pace during the COVID-19 crisis, plus downstream collections and recoveries activity, could create a bow wave of remediation activity. Finally, many firms are realising that the control environments and product assurance mechanisms in place are not robust enough and relying on detective measures like complaints to identify issues are no longer acceptable especially in the eyes of the Regulator and the impending Individual Accountability Framework (IAF).

2. Regulation

Regulators and government bodies in many markets are raising their expectations of the efficacy of remediation execution. In August 2020, ASIC Deputy Chair Karen Chester said in the Australian House of Representatives Standing Committee on Economics that financial services companies need to do a better job of overcoming “old systems and old conduct” in terms both of timeliness of redress and of erring on the side of generosity in making customers good.

The Australian regulator has also increased the threat of enforcement action in line with its raised expectations of Financial Services companies to ensure that outcomes are fair, transparent and delivered in a timely manner.

In the UK the FCA is consulting on the introduction of a new Consumer Duty designed to increase the level of consumer protection in the retail financial services market, signalling what the FCA has called a “paradigm shift in its expectations” of firms. Here in Ireland, there is a heightened Regulator expectation in part due to conduct related issues over the last 10 years, with significant focus on thematic inspections with associated restitutions, MIFID appropriateness and product suitability.

The introduction of the Individual Accountability Framework will re-focus responsibility and accountability and also likely to bring more enhanced enforcement measures which may result in further litigation against firms and individuals. In addition, thematic reviews across the financial service industry continue to highlight conduct risk issues and poor culture within firms and the regulator has noted these as consumer protections areas that they will prioritise in its 2021 Outlook report.

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