Managing regulatory risk in high-volume customer communications

From financial institutions and utilities suppliers to public sector bodies, organisations that send out high-volume customer communications face significant regulatory risks. As the rules evolve so do the threats to financial performance, business objectives and brand reputation. 

This article explores the key risks, the relevant regulatory frameworks, and strategies for effectively managing regulatory risk in customer communications.

The triple threat of regulatory risk

Organisations in sectors under increased scrutiny from the regulators, which deal with high-volume citizen and customer communications, have to navigate three kinds of regulatory risk: financial, strategic and reputational.

Financial risk

Non-compliance with regulations such as GDPR or EPA can result in substantial fines and penalties. These financial repercussions can severely impact an organisation's bottom line and operational stability. 

For instance, GDPR violations can lead to fines of up to £17.5 million or 4% of global annual turnover, whichever is higher. These penalties alone can be catastrophic, especially for smaller organisations or those operating on tight margins, but the loss of future income from customers leaving can be even more ruinous.

Strategic risk

A lack of deep understanding of regulatory requirements can hinder an organisation's ability to achieve its business objectives. Finding ways to work within regulatory constraints while still meeting strategic goals is a delicate balancing act. This risk often manifests in missed opportunities or inefficient processes as organisations struggle to align their operations with regulatory demands. 

For example, a financial institution might delay launching an innovative new product due to uncertainty about its compliance with Consumer Duty regulations.

Reputational risk

Perhaps the most insidious risk is that of reputational damage. Even if an organisation meets the minimum regulatory requirements, a data breach or other incident can severely damage public trust. This loss of reputation can lead to long-term financial consequences that far outweigh any regulatory fines. 

In the age of social media and instant communication, news of compliance failures or data breaches can spread rapidly, potentially causing irreparable harm to an organisation's brand and customer relationships. 

Meeting the minimum standards is not always enough. Staying ahead of the law is a must in today’s CCM environment.

Regulatory frameworks impacting customer communications

A CCM supplier will never know more than its clients about the regulations affecting their industry. 

It’s the job of a good vendor to stay fully up to date with relevant regulations and new legislation. More specifically, to understand the common themes that relate to customer communications, and to adapt quickly to an organisation’s regulatory circumstances.

It’s important to know which regulatory bodies oversee various aspects of customer communications, whether its influence is high or low. At Adare SEC we mostly encounter regulations from the following:

1. Financial Conduct Authority (FCA): The FCA's rules cover a wide range of communication aspects in financial services and insurance firms, from marketing materials to complaints handling procedures. In its remit to improve outcomes for consumers, Consumer Duty lays out specific requirements about the content, timing, and format of various customer communications.
   
   
2. The Information Commissioner's Office (ICO): While the ICO's primary focus is data protection, it does have a role in regulating how companies communicate with customers about their data rights. This includes how privacy policies are communicated, how consent for data processing is obtained, and how customers are informed about data breaches. For example, the ICO oversees compliance with The Data Protection Act 2018, UK GDPR, Freedom of Information Act, and the Privacy and Electronic Communications Regulations (PECR).
   
   
3. Prudential Regulation Authority (PRA): While primarily concerned with financial stability, the PRA's regulations also impact how these institutions communicate with customers about their financial health, ability for insurers to meet claims and risk management practices. 
   
   
4. Central and local government bodies: Several frameworks ensure that government bodies communicate clearly, transparently, and effectively with citizens, often with specific requirements for accessibility and inclusivity. For example, the Electoral Commission, which oversees content of election materials, and ensures transparency of communications around elections. 
   
   The Government Digital Service (GDS) and the Central Digital and Data Office (CDDO), are overseen by the Cabinet Office. They are responsible for enforcing many of the digital standards across central government, including accessibility. 
   
   
5. The Pensions Regulator (TPR): TPR regulations ensure that pension scheme members receive clear, accurate, and timely information about their benefits and the performance of their pension investments.
   
   
6. Ofcom: Regulates communications services, including telecoms and postal services. Ofcom's rules cover various aspects of customer communications, from billing practices to complaint handling procedures in the telecommunications and postal sectors. For example, Ofcom mandates that any changes to contracts must be communicated to customers at least one month in advance.
   
   
7. Ofwat: Regulates water and wastewater services, including their customer communications. Ofwat ensures that water companies provide clear and accurate information to customers about their services, billing, and any disruptions or issues. For example, Ofwat directs companies on how to identify and communicate with customers in vulnerable circumstances.
   
   
8. Ofgem: Regulates electricity and gas markets. Ofgem's rules significantly impact how energy companies communicate with their customers. For example: Ofgem requires energy suppliers to provide clear and accurate information on bills, to give advance notice of price changes and how to communicate with vulnerable customers.

Cross-sector regulatory risks 

While these regulators operate in different sectors, they often overlap and share common themes in how they supervise customer communications. We recommend that customer communications professionals, as well as their CCM suppliers, are constantly on the lookout for changes in the following key areas.

Strategies for managing regulatory risk

To effectively navigate this complex regulatory landscape, there are many opportunities to go beyond compliance to stay ahead of the law. This means asking some pointed questions to your customer communications supplier to make sure you’re getting the best possible service.

Horizon scanning

Maintain a dedicated compliance team that stays abreast of upcoming regulatory changes. They should subscribe to regulatory updates, attend industry conferences, and engage with regulatory bodies to understand upcoming changes.

• Questions to ask your supplier: How do you stay informed about regulatory changes? Can you provide examples of how you've adapted your services to new regulations in the past?

Accreditations and standards 

Pursue relevant certifications such as ISO27001 and Cyber Essentials Plus for data security and ISO 14001 for environment management. These demonstrate a commitment to best practices and can help streamline compliance efforts. Not only do they provide a framework for improving processes but also serve as a signal to regulators and customers of the organisation's commitment to compliance and security.

• Questions to ask your supplier: What certifications do you hold? How often are they renewed, and how do you ensure ongoing compliance?

Multi-channel communication strategy

Implement a diverse range of communication channels to provide customer choice and mitigate risks associated with any single channel. This might include a mix of digital (email, SMS, web portals), print and hybrid channels, each compliant with relevant regulations and offering customers flexibility in how they interact with the organisation.

• Questions to ask your supplier: What range of communication channels do you support? How do you help clients implement and optimise a multi-channel strategy?

Continuous improvement

This means instilling a culture of learning and adaptation, constantly refining processes based on regulatory changes and operational insights. This involves regular review of communication processes, gathering feedback from customers and staff, and being willing to make changes to improve compliance and effectiveness.

• Questions to ask your supplier: What is your approach to continuous improvement? Can you provide examples of recent enhancements to your services or processes?

Robust cyber security

Invest in a dedicated cyber security team and cutting-edge tools to protect against evolving threats. This should include regular security audits, penetration testing, and ongoing staff training to ensure that all employees understand their role in maintaining data security.

• Questions to ask your supplier: What cyber security measures do you have in place? How do you ensure the security of client data and communications?

Business continuity planning

Develop and regularly test comprehensive disaster recovery and business continuity processes to ensure service continuity. This should include specific provisions for maintaining customer communications during various types of disruptions, from technical failures to natural disasters.

• Questions to ask your supplier: What is your business continuity plan? How often is it tested, and can you provide examples of how it's been effectively implemented?

Service excellence culture

Embed a commitment to exceptional customer service throughout the organisation, going beyond mere compliance to deliver outstanding experiences. This involves training staff not just on regulatory requirements but on how to provide empathetic, effective customer service that aligns with regulatory expectations.

• Questions to ask your supplier: How do you ensure service excellence? Can you provide case studies or testimonials demonstrating your commitment to exceptional customer service?

Regular audits

Conduct thorough internal and external audits to gain honest feedback about performance and identify areas for improvement. These audits should cover all aspects of customer communications, from content creation to delivery and feedback handling.

• Questions to ask your supplier: What audit processes do you have in place? How do you incorporate audit findings into your service improvements?
  
  

Hear from the experts, live!

To hear from industry leaders and practitioners about how they are addressing the types of risks above, join us at our conference in Manchester on 15 October: Beyond Compliance: Elevating Customer Communications in Regulated Sectors.

What a good CCM partnership looks like

A top-tier CCM vendor:

• Should have an agile operation that can quickly adapt to changing regulatory requirements and demonstrate a commitment to staying informed and flexible. 
• Should have experience serving multiple clients within your industry – a broad perspective that allows them to proactively identify and mitigate common risks, leveraging insights from across their client base. On the other hand, a vendor with diverse industry experience can often spot emerging trends and potential issues before they become widespread problems.
• Should operate under a philosophy of continuous improvement, constantly refining their processes and technologies to better serve their clients and address evolving regulatory challenges. 
• Should help you deliver communications that delight customers, meeting and exceeding their expectations in a cost-effective manner. 

Ultimately, a good CCM vendor should be able to demonstrate how their services can improve compliance, reduce costs, and enhance customer experience simultaneously.