Root Cause Analysis – a broader scope required under the Consumer Duty
Performing Root Cause Analysis is a critical task that’s laced throughout the FCA’s DISP sourcebook. Because of its relationship with DISP, it is commonly assumed that Complaint Handlers should be performing the share of it. At Square 4, we see this very differently.
Under Consumer Duty, root cause analysis now goes further. Firms are now expected to regularly monitor the outcomes retail customers receive across customer journeys and product lifecycles. This includes; ensuring good outcomes from the products it manufactures or distributes; fair value across cohorts of customers, communications that inform and engage customers, and performance metrics demonstrating the firm’s support to retail customers.
This monitoring must enable the firm to identify whether it is complying with Principle 12 and the cross-cutting obligations. Pertinently, should things go wrong, firms must have processes in place to identify the root causes of any failure to deliver the outcomes listed in PRIN 2A.9.9R for retail customers. So how do you empower teams to identify the root causes of any failings across each of the following core areas?
(1) Whether retail customers are being, or have been, sold products that have been designed to meet their needs, characteristics and objectives.
(2) Whether the products that retail customers purchase provide fair value and appropriate action has been taken to address products identified as not providing fair value.
(3) Whether retail customers are equipped with the right information to make effective, timely and properly informed decisions.
(4) Whether retail customers receive the support they need.
Root Cause ‘Target Operating Model’
Systems and record keeping are key, and certainly, one area where you can effectively capture the 3 core data aspects of the ‘root cause’. These 3 aspects should be captured post-complaint investigation.
The areas are:
1. The Area responsible for creating the issue e.g., Collections, Customer Service, Sales, IT, Product.
2. The Process that failed to lead to the issue e.g., Income & Expenditure capture, changing payment dates.
3 .The Nature of error that contributed to the issue e.g., People/Policy/Process/Training.
Creating a Matrix List
To capture this data, you need a Matrix list of business areas and processes. Linking outcomes to existing areas and processes can narrow down the root cause of issues but it isn’t the complete story. For example, there could be a technical system issue that has occurred, and the agent would have no idea this has happened. However, it’s important to capture the most accurate data available at the time the issue was resolved. It’s also important that you protect this list and stay away from using phrases like ‘other’ or that are ‘generic’ in nature. This waters down your ability to get to the crux of the issue(s).
Whilst creating your Matrix, it’s key to link the area and processes to the accountable SMF role holder. This will help drive clear channels of accountability, process improvement and getting those corporate cogs moving!
This ‘Matrix’ of areas, processes and accountable SMFs is gold, so, controlling it is super important. This means that your existing assurance frameworks should include the accurate capture of root cause and there should be a control in place for customer-facing team members to escalate should an option not exist. What you want to avoid is teams shoe-horning options and derailing your corporate data. Clear data points will enable the measurement of customer outcomes across the entire product lifecycle, driving better root cause analysis and clearer Management Information.
Utilising Core Data and Analytical Techniques
Effectively, this “core data” should then feed into a dedicated root cause analyst. This could be either a team or an individual based on business size. This team/individual should be suitably qualified to perform root cause analysis. It is common to invest in SIX SIGMA techniques – often the 5 Whys, Fishbone, DMAIC etc. If utilised effectively these can be powerful tools to perform and record your analysis.
Be sure to use other data sources too, such as customer survey results as well as learning from FOS overturned decisions related to the same issues you’re analysing to build a complete picture. It’s not uncommon to include the customer or a cohort of customers in the process by seeking their feedback on a solution before implementation. This is particularly powerful when looking at customer touch points/experiences and vulnerability inclusivity.
What’s also key is the team/individual performing ‘business interviews’ with the areas where the problem(s) occurred. The process must include ‘rolling your sleeves up’ to build credibility and engender a culture of learning from previous issues. You’ll also want to draw some conclusions and corrective action suggestions that can be fed into the Root Cause Forum to decide on the next steps ultimately.
Be careful to ensure that a key objective of the forum is to challenge itself on whether the issue being complained of and indeed the corrective solution being sought impacts a wider population of customers who have not complained. Their voice must be heard through this process. The decision to widen the corrective action can then be captured as part of the session itself. This will serve as powerful evidence that the root cause is at the heart of your business.
Root Cause Analysis Forum – Bringing it all together
The purpose of a Root Cause Analysis forum is to discuss the key recurring themes (informed by the core data capture and root cause analysis noted above) causing issues to occur. Actions should then be assigned to address these issues. Once the corrective action has been taken, the forum should monitor for an agreed period (typically 90 days) ensuring the action has indeed mitigated the issue. At that point, the issue can be formally closed.
The complexity of your business and product offering will inform the frequency at which you should hold an Analysis Forum. For example, if you offer one or two consumer finance-related products, you may choose to hold a forum every 2–3 months. In contrast, a more complex bank offering a range of products may choose to meet more frequently i.e., monthly.
The Root Cause Analysis forum should be attended by SMF’s and/or deputy Certified. Resolving issues is a shared responsibility of the SMCR framework. The real long-term change will be driven from the top. These fora are most effective when chaired by the most senior Operations representative, typically the Chief Operating Officer. They should be supported by the Director/Head of Impacted Area/Root Cause. There must be a direct linkage to outcomes within Consumer Duty, with a clear governance framework up to the Board.
Conclusion
A culture of continuous improvement right across your business, focused on fixing issues and preventing them from arising in the future. In turn, driving good customer outcomes is a core component of Consumer Duty. It is imperative to have processes in place to identify the root causes of failing to deliver good outcomes. This is a very visible indicator of how embedded Consumer Duty is. We have worked with several clients with regard to their RCA Framework, core data, and fora. Should you find this of interest, please do get in touch.
About Square 4
Square 4 was founded with the vision to support people and businesses to grow and thrive.
Across the team, we have extensive experience incorporating the ‘big four’ professional service firms. Expertise from industry regulators, leadership roles within regulated firms and other outsourced learning, resourcing and consultancy providers. We combine this expertise with best-in-class technology across an evolving spectrum of conduct, financial crime and operational risk.
