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corporate plan & 2006/07 budget - dealing with the demand

Other key challenges and constraints arise in relation to:

  • staffing;
  • quality and process;
  • systems and resources; and
  • regulatory and political issues.

staffing

We have to match staffing to an inflow of work that can change rapidly, in relation both to overall numbers and to the product-specific expertise required to deal with it. If the mix of work changes, then experienced existing staff will need re-training in (possibly complex) product-specific areas.

If our total workload increases unexpectedly, there is inevitably a delay before we can complete the recruitment of additional adjudicators. Generally, so far, there has been no shortage of suitable recruits but that may not continue - and there is a skills shortage in some specialised areas.

Once we have recruited additional adjudicators, it takes time before they have sufficient training and experience to resolve cases without close supervision.

The ombudsman service has tripled in size in five years. A quarter of our adjudicators have been with us for less than one year, and only a quarter for more than two years. This places particular strain on our middle managers and more experienced adjudicators, who must coach newcomers and also deal with the more complex cases.

Until now, staff turnover has been low, but that may not continue. The accumulated pressures of a rapidly-increasing workload may have an effect. And there may be less scope in future for career progression within the organisation, when compared with the period of rapid growth over the last five years.

quality and process

The matching of staff numbers and expertise to our changing inflow of work creates a challenge in maintaining and enhancing quality. We see 'quality' as including an outcome that is correct, consistent, clear, timely, authoritative and persuasive.

Currently, individual decisions made by an ombudsman are not usually published for public scrutiny. This makes it less easy for us to demonstrate publicly the quality standards we have achieved. So it is all the more important that we communicate openly the approach we take in reaching our decisions.

Timeliness can be adversely affected by a number of external factors. For example:

  • The majority of firms are unused to having complaints referred to the ombudsman service and are unfamiliar with our process.
  • Some professional indemnity insurers and their lawyers treat the ombudsman process as if it were a form of litigation.
  • Some claims intermediaries try to impose their processes on us.

Our work can also be slowed by the increasing number of hard-fought and complex cases where the stakes are high for the firm. Threats of judicial review are not rare. And the High Court has confirmed that we are right to use a more detailed and measured approach to the most significant and complex cases.

Not only are financial products attracting a broader range of consumers, but the needs of consumers are changing. For example, some products are aimed at consumers who have not invested before. Some consumer credit borrowers are disadvantaged. And some of the consumers who are new to financial products may feel intimidated by our existing procedures - informal though they are.

systems and resources

Our current computer systems have coped well with the organisation's expansion and adaptation. But, like all systems, they have a limited life.

Our funding is variable. The majority of it comes from case fees. The expansion of our workload has produced increasing income, which has funded our additional workload as well as leading to economies of scale. But changes in the mix of work can increase unit costs, despite efficiency savings.

Our funding is also comparatively inflexible. It uses the same principles for firms of all types and sizes.

  • Most small firms refer no cases to us. And there is no case fee for the first two cases per year. So only 5% of firms (predominantly the larger ones) paid any case fees in 2004/05. Despite this, some small firms resent the risk of case fees.
  • At the other end of the scale, the current level of case fee has not dissuaded a few of the large firms from skimping their in-house complaint-handling and ‘dumping’ cases on the ombudsman service.

We have been able to expand within our existing building, on terms that give us reasonable flexibility to reduce in size again. But there is little room left for expansion. So any significant increase in staff numbers would necessitate a considerable amount of 'home-working', or a complete or partial move to new premises.

regulatory and political

We need to continue working closely with the FSA, so far as is consistent with our independent roles, where these roles overlap. A practical example of this is the process we have developed to deal with 'wider-implications' issues and to publish the results.

We will need to develop similar interaction with the OFT in relation to consumer credit. The different nature of many of the firms, and of some of the issues, in the new consumer credit jurisdiction will affect this - as will the fact that the powers of the OFT differ from those of the FSA.

The statutory framework within which we, the FSA and the OFT operate was set by Parliament and might change. This could have direct or indirect effects on the nature of our role and the amount of our workload.