Europe Report on Product Governance
by Leica Ison
A recent research report by the European Banking Authority (EBA) on product oversight and governance provides some useful insights for product management in 2021. This research surveyed 78 providers across 12 EU Member States on how they have implemented product oversight and governance arrangements in these five areas:
(i) general product governance,
(ii) product design and the identification of the target market,
(iii) product testing,
(iv) monitoring, review and remedial actions and
The study found that the general approach that companies used for product oversight and governance consist of several phases:
a) the product governance arrangement (i.e. product design, target market and distribution channels definition);
b) the product consideration phase (i.e. product pricing, assessment of the product's risk and the steps towards its introduction),
c) the product-testing stage;
d) the product approval process and the product implementation, monitoring and review
In addition to these phases, some companies also developed a 'two-tier' board structure with a Supervisory Board over the Executive Board.
Top 3 take-outs to reset your product governance in 2021:
A strategic role for product managers
The research highlights that it is good practice to have defined structures and clear escalation lines. The EBA believes that a process singularly owned by the compliance or risk function is not good practice.
It is considered good practice to have specific work-flow documents and checklists to ensure there is a clear audit trail and that the process is the same for all products.
For example, this could involve setting up a centralised documentation tool that clearly defines the roles and responsibilities of the different units and critical staff engaged in the POG process. To ensure that consumer needs are being considered during that process, it would be beneficial to seek consumers' views during the design phase of the product.
Customer needs should form the cornerstone of product design and distribution
Ensure customer needs are met in the product design phase using a Target Market Determination.
Product managers might consider using a set of criteria based on client segmentation to ensure that the product is deemed appropriate for the interests, objectives and characteristics of the target market such as :
- demographic data (e.g. age of the clients); -
the characteristics of the respective product in relation to the risk aversion profile of the customer (e.g. financial situation creditworthiness assessment and the other types of products offered);
- level of knowledge of financial capability;
- level of financial and investment expertise of the clients; - relevant legislation
The strategic importance of frequent product monitoring and review
The customer should continue to form the cornerstone of the product innovation lifecycle with regular monitoring and review. The frequency of reviews should be consistent across all products; however, complicated and risky products should be reviewed more consistently.
It is considered good practice that once a product is in-market, the product manager is ultimately responsible for product monitoring and should monitor the product on an ongoing basis to ensure that consumers' interests, objectives, and characteristics continue to be appropriately taken into account. It means that manufacturers must
- revise the product during the product monitoring,
- and take action if an issue is identified.
The Skyjed product lifecycle management and governance platform provides organisations with a 360-degree view of their product portfolios health and risk status while facilitating collaboration, transparency and product trust in the day to day operations of the organisation.
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