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Learn about our 2022 National Healthcare Research ProjectThis is the fifth topic in a series of articles where we discuss the top 5 issues to consider in relation to the Financial Services Design and Distribution Obligations (DDO).
In this insight, we take a look at important aspects of DDO – decision making (governance), monitoring and assessment (oversight), and correction (change management).
Beyond achieving compliance, there are substantial commercial benefits likely to arise from DDO related activities to improve product management practices. However, this is only likely if the work is undertaken with the mindset of “wanting to” – making the most of the situation rather than “having to” and doing as little as possible.
One way to approach that could be to ask this simple question in relation to each of the obligations:
How could doing ‘X (each obligation)’ enable me to better manage product performance?
From our perspective, there is virtually nothing required that you would not include if you were seeking to make the most of your approach to product management.
Here is a brief summary of the aspects involved.
Accountabilities and decision-making authorities need to be clearly defined.
The scope of decisions involved spans the full product management lifecycle – product design, product distribution, monitoring and review – and where appropriate, based on results, taking corrective action.
Product Design
If the answer is no to any of the above for existing products, then changes must be made to the product or the distribution. Otherwise, the product can no longer be sold.
Distribution Design
The approach to distribution must be designed so that only those in the target market will be sold the product – this is likely to involve setting up restrictions.
Beyond design, steps must be implemented to ensure that the approach to distribution is followed, and deviations are detected and addressed.
If historical practices resulted in a product being sold to customers outside of the new target market, then changes to distribution are required.
Of particular note:
The means of monitoring, reporting, analysing results and determining what actions (if any) are required all form part of the second leg of the obligations.
Continual Monitoring, Analysis and Reporting
These involve measuring and assessing both:
Performance must be assessed regularly. Where products are not meeting the target markets objectives, financial situation and needs or where distribution is resulting in sales beyond those in the market, the appropriate corrective action must be identified and taken.
It is important to note that there are considerable regulator notification obligations that include explaining what actions have been taken to address issues identified.
It is also a requirement that all of the above must be documented, fully implemented and review regularly for ongoing effectiveness.
The above is only a summary of what is required; the detail is extensive. That said, it may be worth asking if you were to ignore the regulatory obligations, are there any aspects of the above that could not be leveraged to better manage your products?
We believe that answer is clear – the work required to meet the DDO requirements can and should be undertaken as a means of improving product management.
With DDO enforceable, it is important to ensure your organisation is on track to be both compliant and capitalise on the opportunities that the DDO present to improve product management discipline and deliver improved financial outcomes.
If you have questions about DDO or need assistance in working out what needs to be done or how you are travelling in your preparations, we are here to help.
Our next and final insight will be a quick recap of DDO and include some further practical suggestions as to how meeting these obligations can be leveraged to improve growth and product performance.
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A dedicated practitioner who is always across the detail, Michael applies a structured approach to risk assessment, assurance information gathering, decision making and implementation to ensure execution matches intention.
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