Risk and compliance video series: 5 biggest mistakes around customer outcomes, data and risk management

Video | October 2018 | 04:23

Video Details

Risk and compliance video series: 5 biggest mistakes around customer outcomes, data and risk management
Christian Blackwell Good afternoon, and welcome to the first in our new series of short videos on risk and compliance. I am here today with John Davison to talk about the five biggest mistakes that we’re seeing in the marketplace around customer outcomes, data and risk management. John, I don’t know whether you could start by talking about what you see as the biggest risk in that area. 
John Davison I’ll give you two Christian I think. I think the first thing is that firms don’t often use commercial performance data as a proxy of risk or proxy of risk change. What I mean by that is often product performance, data is used to measure product performance only, as opposed to considering it in the context of the risk profile of the organisation. So I think using that business data as a proxy of risk and analysing that data through two different mechanisms I think is critical. The second one linked to that is an over-reliance on detective controls.  Detective control data is easy to find and it’s been commonly used over the last number of years. And I think the problem with that is the control testing and monitoring is only as good as the quality of the control testing and monitoring and gives you a very two dimensional view of risk. So I think limiting your risk data to detective control outputs is an important measure, but it’s one of what should be a portfolio of a range of different measures.
Christian Blackwell Taking that data point a little bit further, is there anything we can learn about the actual data itself?
John Davison Yes. One of the key challenges organisations have is not really deeply understanding what the data is telling them. So for example, if you take an example of customer complaints, you can demonstrate regulatory compliance with the traditional elements of a handbook by using basic detective control data. But actually, that sort of information doesn’t tell you how well you’ve handled the complaint or the quality of the response. So actually understanding what data is and isn’t telling you is critical. Because if you don’t understand that, there is a risk that management will make decisions based on limited understanding or an incomplete understanding of what the data says they have in front of them.
Christian Blackwell Thanks John. One of the things we’re hearing from regulators at the moment is about control environments and about control effectiveness more broadly and how that links to customer outcomes. I don’t know whether you could tell me about the things we’re hearing and learning about that at the moment?
John Davison Yes, that’s a great point and I think there’s one key mistake really related to that. That a lot of time, organisations consider control effectiveness to be a pure proxy for customer outcome. Obviously, you can control things better than you can control others and I think that what’s really, really important is that control effectiveness is a very good measure of whether or not your overall environment is working. But customer outcomes – what customers need, what customers want and how you deliver to customers - often is a measure beyond pure effectiveness of individual controls. That segways into another point for me, which is that it’s important when you’re looking at outcomes to look at the end to end customer journey. So the relationship between different parts of that journey on the other parts of that journey. So when you’re looking at control effectiveness and thinking of that as measure of outcome or part of a measure of outcome, understanding all of the relating control points and the impact they have end to end on each other as part of a package I think is the only way you can relate the two in a fairly sustainable way.
Christian Blackwell What about product performance in that whole scenario? How does that get impacted?
John Davison For me, the fifth, and one of the most important points, is making sure that people don’t look at products and the performance of products for customers purely in isolation and don’t think about the impact of the economy, the impact of regulatory change, the impact of process change, the impact of customer behaviour on the actual way in which products perform and what they’re designed to achieve. So all of the data in the world is fantastic, but actually products perform differently in different scenarios and actually making sure you analyse your data in the context of outcome and in the context of changes to the product portfolio in the market I think is an important way to put preventative control measures on the table of the management.
Christian Blackwell Thanks John and thank you everyone else.