Regulation may hinder rather than help customer outcomes

31 May 2016

Jenny Gillen, r2i

Conduct risk continues to be a huge area of focus across regulated industries, particularly financial services, following a catalogue of high profile customer failures in recent years.

Does regulation help solve the problem? Does it encourage businesses to do the ‘right’ thing or just create a set of tick boxes that deviate from actually considering customer needs? PwC asked 2,400 business across Northern Ireland (NI) and Republic of Ireland (RoI) whether regulation helps protect customers from poor outcomes. Whilst the majority of businesses surveyed (6 in 10 in NI rising to almost 7 in 10 in RoI) believe that regulation does help protect customers from poor outcomes, a significant proportion (one quarter in RoI rising to one third in NI) consider that regulation makes no difference in this regard. Around 1 in 20 believe it actually increases the risk of poor customer outcomes.

Regulation as a whole in fact is viewed with some scepticism with less than half of businesses believing it actually promotes business growth within their industry (40% in RoI and only 30% in NI), with one quarter thinking it actually inhibits business growth. Perhaps this is due to the perceived shift in regulatory focus areas or the administrative burden of evidencing delivery of these, inadvertently directing resources from serving customers.

A customer-centric organisation therefore cannot rely on meeting regulatory obligations alone to deliver good customer outcomes. It is widely recognised that addressing culture is critical to delivery of a truly customer-centric approach that will improve customers’ experiences and strengthen overall risk management practices.

Establishing and embedding a culture in which employees are doing the ‘right’ thing at the ‘right’ time, regardless of circumstance, is key to an organisation’s ability to conduct itself in a manner that is commensurate with its regulatory obligations, the expectations of its stakeholders including its customers, and its corporate vision.

So to what extent are businesses actively seeking to understand how their employees behave ‘when no-one is looking’? PwC asked businesses about their efforts to measure the behaviours and conduct of their staff. Despite acknowledging the value of a customer-centric strategy, just 3 in 10 RoI businesses currently measure the conduct of employees, with only 1 in 5 in NI. Around 1 in 10 businesses in both regions state they have plans to implement some degree of employee conduct assessment but the majority are not presently tracking performance.

A significant opportunity exists for organisations to gain competitive advantage by further embedding customer-centricity into the behaviour of employees. The starting point for this has to be defining ‘what good looks like’ and proactively measuring employee behaviours and motivators, alongside a robust regulatory regime. Only then can businesses have visibility of what may be needed to cultivate their target culture, improve customer outcomes and, in turn deliver commercial success.

 

For more information on how to better understand culture and employee behaviours, please click here

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