Financial Institutions – have you embedded a robust product governance ecosystem?

When we speak with Australian-based financial institutions about their product governance, the conversation typically flows swiftly from Design & Distribution Obligations to product value chain risk management, and then from governance committees to risk and control management. However, the conversation stalls as we dive deeper into the ecosystem needed to provide real and meaningful support to the evolving product governance expectations.

In our view, product governance is core to running a sustainable financial services business. A business’s products are its connection to customers, its offering to the market, and the heart of why the business exists.

In recent years, product governance has attracted heightened attention given the focus from the Financial Services Royal Commission findings and resulting regulatory changes. While there has been growing focus on getting the basics right, leading financial institutions want to future-proof and assess the adequacy of their product governance more holistically.

This article highlights key areas to consider when reviewing your current product governance ecosystem and its effectiveness:

Periodic monitoring and review of frameworks

Having a framework consisting of governance committee(s), product value chain policies, standards, guidelines, handbooks and other artefacts does not necessarily guarantee compliance or continual relevancy of requirements.

Periodic monitoring of adherence to, and effectiveness of, policy requirements and associated documents are equally important. Testing and observations can then feed into a periodic review of policy requirements which assesses the latest regulatory changes, industry body practices, community expectations, competitor benchmarks, other relevant policies and internal stakeholder feedback can all help to ensure the policy and its associated suite of documents remain fit-for-purpose.

Integrated systems and tools

Financial institutions often have legacy systems that are costly to maintain, upgrade or integrate. A product-centric central risk and compliance repository as single source of truth provides the ability to ingest information in one dynamic reporting tool that has dashboards that are easily customisable by business stakeholders, helping reduce mismatch or loss of data between departments.

Action-oriented reporting and insights

Agreeing on the purpose, objective and audience of the product governance-related reports are critical first steps in managing product related data. This step helps determine appropriate data extraction parameters, the “so-what” message, data presentment and granularity.

Periodic reviews on the health of all products and supporting infrastructure, can provide useful insights around what is working well, improvement opportunities and risks tracking through to resolution.

Process optimisation

Organisations often attribute innovation to building new infrastructure and new interfaces, which may unintentionally layer on new processes and complexities to the existing end-to-end product value chain. Instead, businesses can consider reallocating resources to streamline and enhance operational processes, improve efficiency, reduce costs to serve and enhance customer experience. Governance of products should include oversight of whether product processes are streamlined, nimble and able to quickly adapt to changing customer and business needs.

Specialist skillsets and cultural shift

There has been recent increased scrutiny on ensuring product governance practices are uplifted which has resulted in a shortage of product governance experts with specialist skillsets and responsibilities. Key abilities include product risk management capabilities; strong product management skills; understanding relevant legislation, regulations, standards and governance protocols; experience, communication and implementation of relevant regulatory changes and policy requirements; an ability to design, implement and uplift product compliance monitoring plans; and customer centricity.

Formalise conduct risk and customer outcomes

Regulators have also been keen to understand how organisations manage non-financial risks, in particular conduct risk. Some financial service businesses may need to reassess whether their existing sales practices are over influencing buyers and whether disclosures are easy to access and understand for all relevant stakeholders. Co-creation of product and sales processes with customers is one way to improve overall customer experience and satisfaction.

As products are an entities connection to their customers and are the fundamental core component of their business, its imperative that the risk associated with products is effectively managed and monitored. By taking the time to evaluate and improve the product governance ecosystem entities have the opportunity to enrich their interactions with customers, enhance their systems and controls and meet the ever changing expectations of regulators.

Share

Tags

Add a comment