The Report Is the Diagnosis
A good year-two board report is honest about where the firm falls short. The FCA has consistently valued a clear statement of residual risk over an assertion of full compliance. So the report that was signed off in July should contain a list of areas where the firm's evidence was weaker than it wanted — and that list is the work programme for H2.
The mistake is to file the report and move on. The board attested to specific findings; those findings imply specific actions; and the year-three report will be assessed partly on whether the firm did what the year-two report said it would. The gap between "we identified a weakness" and "we fixed it" is exactly what a supervisory review would probe.
Reading the Year-Two Gaps
Three gap types recur across year-two reports, and each implies a different kind of H2 work.
- Data gaps. The firm has a policy but limited data on whether it is being applied — most commonly on vulnerable customer identification. The H2 work is instrumentation: building the data capture that turns a policy assertion into an evidenced outcome.
- Analysis gaps. The firm carried forward year-one price-and-value benchmarking rather than refreshing it. The H2 work is analytical: a genuine unit-economic refresh for the current environment.
- Process gaps. The firm found that an MI signal was generated but no action followed. The H2 work is procedural: closing the loop between MI and management action.
Funding the Remediation
This is where the CFO's ownership becomes concrete. Consumer Duty remediation costs money — data engineering, analytical capacity, sometimes external support. The year-two report identified the gaps; the H2 budget has to fund closing them. If the remediation is unfunded, the year-three report will report the same gaps, which is a materially worse position than reporting them once.
Track the cost. The FCA has been explicit that the Duty is an ongoing operational commitment, not a one-off project. The true run-rate cost of the Duty — incremental headcount, systems, external audit, board time, and now remediation — becomes visible in year two. Building that into the P&L and reporting it to the board is a CFO deliverable, and it is the number the FCA will eventually ask for when it reviews the sector's cost of compliance.
The Price-and-Value Follow-Through
Price and value is the area most firms found hardest in year two, and it is a CFO deliverable in substance because it is a unit-economic exercise. The H2 follow-through is a genuine refresh: cost to serve, revenue per customer, margin, and benchmark comparison for each product, in the current environment rather than carried forward.
The 2026 environment specifically requires addressing the impact of the falling rate path on savings-product margins, the appropriateness of fee levels against the current cost base, and any cross-subsidy that has emerged between customer segments. A refresh done in H2 2026 feeds directly into the year-three report and demonstrates the dynamic assessment the FCA expects.
"The year-two report is where the firm told the board — and implicitly the regulator — what it knows is not yet good enough. H2 is where it either fixes those things or documents, in next year's report, that it did not. There is no third option that survives a supervisory review."
Building the Year-Three MI
The single most common year-two weakness is MI that asserts adequacy without evidencing it. The defensible year-three governance statement identifies specific outcome metrics, the source system for each, the reporting frequency to the board, and — critically — at least three concrete actions taken in the period in response to an MI signal.
That last requirement is the one to build for now. Through H2, the firm should be capturing, every time an MI signal drives a management decision, a short record: the signal, the decision, the outcome. By July 2027 the firm then has a documented set of MI-driven actions rather than scrambling to reconstruct them. This is cheap to do continuously and expensive to do retrospectively.
The H2 Cadence
A workable rhythm for the H2 remediation, assuming a July board-report cycle:
- August: Convert the year-two findings into a funded work programme with named owners and a cost line in the H2 budget.
- September–October: Data instrumentation for the identified data gaps; begin the price-and-value refresh.
- November–December: Complete the price-and-value refresh; embed the MI-to-action logging.
- Q1 2027: First full quarter of clean outcome data against the remediated areas.
- Q2 2027: Assemble the year-three evidence base while the data is fresh.
Key Takeaways
- The year-two board report was the diagnosis, not the finish line. Its honest list of gaps is the H2 work programme.
- Three gap types recur — data, analysis, process — and each implies a different remediation: instrumentation, unit-economic refresh, or MI-to-action loop closure.
- Fund the remediation. An agreed-but-unfunded plan documents a known gap the firm then fails to fix — worse than reporting it once.
- The price-and-value refresh is a CFO deliverable: a genuine unit-economic re-run for the current rate and cost environment.
- Build the year-three MI evidence now by logging every MI-driven management action as it happens — cheap continuously, expensive retrospectively.
- Run a defined H2 cadence so the year-three report is assembled from fresh, evidenced data rather than reconstructed under deadline.
