John Statham advises on the steps a company should take to demonstrate a sound strategy

Regulation is a fact of life in the insurance industry. No matter how firms protest, meeting the FSA's expectations does have to be taken seriously.

But the findings from supervisory reviews do suggest that boards simply do not spend enough time and effort ensuring that the bigger picture - their organisations' strategy and the process used to produce and monitor it - will pass muster.

If you can't demonstrate a sound strategy, based on a robust process, you're off to a shaky start with the FSA. Let's look at the practical steps you can take for some quick wins with the regulator.

First port of call must be what the firm and its staff believe and understand is the current strategy.

Firms must take care to differentiate between the 'vision' and 'mission' statements, which often represent nothing more than soft and fluffy HR, or mumbo jumbo marketing speak, and a strategy that sets out clear objectives and measurable achievements.

As a regulated firm, you do want to convey the impression (and hopefully the reality) that you have a plan of where you are heading.

A good starting point is to ensure that your strategy includes evidence of making choices on:

  • Which products and services you offer
  • Which customer groups will be targeted and served
  • Geographical markets
  • Channels used to sell products
  • How to deliver the service required
  • Resources - people and money
  • Mix of internal and external resources
  • Understanding risks and rewards
  • Relationship of reward to risk - are shareholders satisfied?
  • But simply demonstrating that you have addressed the issues isn't really going to convince people that you have made either the correct choices or will have any hope of delivery.

    If as a firm you want evidence that you have made good quality choices, then you must be able to discuss or demonstrate that you have a robust planning process that you follow.

    Getting the quality end product does require that you ask a lot of questions of the relevant people.

    They should be able to draw on reliable research, market information or in-house management information.

    Basic project management principles, even adapted to the size and complexity of the organisation, will require that you show some form of evidence that you have:

  • Clearly specified the scope of the project and its objective
  • Identified the resources required
  • Clarified roles and responsibilities - in particular, the sponsor and project manager
  • Defined or determined the output required as the end result - from each stage if you are a larger organisation
  • Set expected timescales, both for the overall project overall and its critical stages
  • Established a management reporting process.
  • Also ask any firm if its strategy ever worked out according to plan, and it will tell you that nothing ever works out exactly first time.

    For example, tasks and resources will evolve as the detail of the work emerges, but without some sound initial framework to operate within, it's no wonder the regulators get worried if you can't explain the essential basics of what your firm is all about.

    Equally, the size of the firm does have a bearing on the complexity of the process and the people involved.

    The insurance industry is paricularly people focused so it is important to communicate and involve many different groups.

    The understanding and awareness may be expected to vary once you move outside of the senior management team. But the culture of the board and the firm as a whole can be tested with just a few basic questions to gauge awareness.

    If you want to do your own test, just ask the people across the desk, just what they know about the strategic business plan for 2005.

    While some firms may find the thought of writing a strategic plan, a daunting task, if you've put a sound process in place and organised the building blocks, it becomes much easier.

    Using a few simple guidelines and templates, then adapting them to your organisation and planning exercise, will help you run a robust, professional strategy exercise.

    While firms may point to the cost of regulation, this simple good management practice exercise, will help you to:

  • Understand the competitive environment
  • Know your people and financial capabilities
  • Make informed choices on products, customers, markets and distribution channels
  • Understand where and how things might go wrong and what to do to get back on track
  • Have clear, communicable goals, and specific objectives to track progress and achievement.
  • The cynics may suggest that you might have got there in the end anyway. But regulators take a much more relaxed view of firms that can not only show that they know where they want to go, but in time can demonstrate a track record of achievement.

    As the planning season approaches just how sure are you that your process and planned output will pass muster? IT

    ' John Statham, is a consultant specialising in strategic planning and management at FSA Solutions