s.172 CA 2006 Statement

Section 172(1) Statement and Statement of Engagement with other stakeholders including employees.

The directors provide the following statement pursuant to the Companies Act 2006 (as amended by Companies (Miscellaneous Reporting) Regulations 2018) (the “Act”) to describe how they have acted in accordance with their duty under s.172 of the Act to promote the success of the company for the benefit of its members as a whole, and in so doing, how they have had regard to those factors set out in 172 (1) (a) to (f) of the Act during the financial year. 

In accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018), the directors provide the following statement describing how they have engaged with employees, and how they have had regard to employee interests and the need to foster the company’s business relationships with suppliers, customers and others, and in each case the effect of that regard, including on the principal decisions taken by the Company during the financial year.

Section 172 requires a director to have regard to the following matters, among others, when discharging their duty: the likely consequences of any decision in the long term; the interests of the Company’s employees; the need to foster the Company’s business relationships with suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly with members of the Company. During the financial year, the terms of reference for the Board were updated to remind the directors of their legal duties including under s.172 of the Act.

The Board is collectively responsible for managing the affairs of the Company to achieve its long-term prosperity by making important decisions, monitoring performance and establishing ethical standards. Board meetings are held periodically where the directors consider the Company’s principal activities and make decisions. As a part of those meetings, the directors receive information in a range of different formats on section 172 matters when making relevant decisions.  When making decisions the Board seeks to understand the impact on each of its stakeholders, including the likely consequences of a decision in the long term, while acknowledging that a decision will not necessarily be favourable for all stakeholders.  

The Company follows a range of group-wide policies in place to protect employees and provide a safe working environment, to ensure compliance with all regulatory requirements and adherence to the highest professional and ethical standards in dealing with customers, suppliers and colleagues, and to ensure that it continues to operate in a socially responsible and compliant manner and manages environmental sustainability. In doing so, and by balancing the interests of the Company’s stakeholders when making decisions, the Board seeks to maintain a reputation for high standards of business conduct. Further information on these group-wide policies can be found in the annual report and accounts of the Company’s ultimate holding company, Close Brothers Group plc.

The directors seek to engage directly with stakeholders wherever possible on certain issues, however, the size of the Group means that stakeholder engagement often takes place at an operational or Group level. This approach creates greater efficiency and facilitates a greater positive impact on environmental, social and other issues than may be possible at an individual company level. Where engagement has taken place at operational level, the outcome of that engagement has been brought to the Board for its consideration where relevant throughout the year.   Further detail on engagement at Group level with stakeholders, including employees, suppliers, customers, the community and environment can be found in the Strategic Report section of the Annual Report and Accounts of Close Brothers Group plc.

Throughout the year, both generally and in relation to specific matters, the Board has had regard to the interests of its stakeholders and has engaged with them in a range of direct and indirect ways.

The table and case studies below set out more details of the ways in which the Board has engaged directly with stakeholders during the financial year, how the directors have had regard to employee interests and the need to foster the Company’s business relationships with suppliers, customers and others, and the effect of that regard, including on principal decisions taken throughout the year, as well as matters set out in section 172(1)(a)-(f) when discharging their duties under section 172. 

Our stakeholders

OUR STAKEHOLDERSWHY WE FOCUS ON THEM AND THE IMPACT OF ENGAGEMENTSTAKEHOLDERS’ KEY PRIORITIES AND AREAS OF FOCUSHOW THE BOARD AND MANAGEMENT ENGAGE AND CONSIDER STAKEHOLDER INTERESTS
Customers, clients and partners Customers, clients and partners (continued)The Board believes in putting our customers, clients and partners first, and remains focused on upholding our reliable, high-quality services and personal approach 

Putting the interests of our customers, clients and partners at the heart of our business is critical to our success, and the Group’s purpose to help the people and businesses of Britain thrive over the long-term underlines the Board’s commitment in this area 

Engagement with customers, clients and partners allows us to understand their needs and receive feedback and insight that is essential to maintaining strong relationships across our business 
A customer-led proposition

Strong personal relationships and specialist expert knowledge

Consistent customer service in all market conditions

High service levels and flexible solutions
Regular reporting and discussion of matters and updates relating to customers, clients and partners

Ongoing measuring and monitoring of customer experience against key customer principles and conduct risk framework

Analysis of feedback via customer forums 

Visits to and meetings with clients, customers and partners

Monitoring and analysis of complaints and activity to ensure we treat customers fairly and deliver on our promises

Consideration of policies and participation in training in relation to the identification of vulnerable customers and the fair treatment of customers

Specific consideration of issues for customers, clients and partners arising from the Covid-19 pandemic, including information in relation to customer forbearance 
EmployeesThe Board recognises the importance of the contribution made by our employees, who deliver the highest levels of service for our customers and clients 

Engagement with employees helps to build a deep and diverse talent pool, attract and retain talent and ensure that employees remain enthusiastic about their work and their organisation 

Regularly listening to employees’ feedback ensures they feel valued with their views recognised and acted upon  
A customer-led culture

A fair and open working culture

A supportive culture where employee feedback is valued, and their views are recognised and acted upon

Appropriately rewarded for their contributions

A commitment to invest in training and development
Review and analysis of annual all-employee opinion survey results, and consideration of follow-up action plans

Review and analysis of additional all-employee opinion surveys during the Coronavirus-pandemic, including on well-being and return to workplace planning

Quarterly review of culture dashboard by local Risk and Compliance Committee, including consideration of employee and conduct metrics

Participation by directors and management in regular employee engagement activities, including town halls and Q&A sessions

Updates from management on various metrics and feedback tools in relation to employees·      Regular communications to employees on the performance and operation of the business

Regular updates and engagement on matters relating to Covid-19, including operational implications of the lockdown/return to the workplace

Implementation of comprehensive whistle-blowing procedures and encouragement to employees to report relevant matters

Oversight of and participation in training, development and mentoring programmes for employees

Encouragement to participate in Group-wide Save as You Earn and Buy as You Earn schemes to encourage employee ownership in the wider Group

Engagement with employees via Group-wide diversity & inclusion initiatives and working groups 
SuppliersOur business is supported by a number of suppliers who enables us to provide high standards of service to our customers, clients and partners 

Engagement with suppliers enables the Company to develop and maintain long-term and sustainable relationships and helps ensure that the Company purchases products and services from suppliers who operate responsibly and in line with our policies and standards
Appropriate and clear payment procedures

Strong and sustainable relationships with Close Brothers

Workable operating requirements
Engagement with key suppliers during the Covid-19 pandemic

Review and consideration of material contracts with suppliers and ongoing supplier relationship management

Established processes for the management of supply chain risks and issues, with escalation to the Board and management as appropriate
Regulators Engagement with regulators and applicable regulatory requirements help the Company develop and maintain open and transparent relationships with our regulators, maintain a reputation for high standards of business conduct and also helps the Board ensure that the business is aligned to the evolving regulatory framework   Fair treatment of customers and clients

Awareness of evolving regulatory landscape

Recognition of the importance of resilience and risk management

Recovery Resolution Plan 
Regular reporting and discussion on regulatory developments,      correspondence and interactions

Regulatory risk and compliance reporting to local Risk and Compliance Committee

Consideration of the regulatory horizon including via risk and compliance reports

Consideration of relevant policies and standards that support compliance with regulatory and compliance requirements

Participation in broader Group regulatory initiatives and programmes

Oversight of training for all employees on applicable regulatory requirements 
Communities and EnvironmentAs part of the broader Group, the Board is committed to contributing long-term value and making a lasting, positive impact on the society in which we operate and the environment more broadly 

Participating in local communities helps the Board and our employees develop our understanding of the clients, customers and partners so that we can support them and help them to achieve their ambition
Strategy or approaching sustainability issues

Support for community initiatives
Actively encouraging employees to contribute community and charity events and to fundraise and volunteer for charities, including the broader Group’s charity partners

Board and management participation in local charitable and volunteering activities

Consideration of the Group’s wider environmental strategy, activities and goals, and the contribution that the Company can make to make a positive contribution to the world around us
ShareholderThe Company is a wholly-owned member of the Close Brothers Group plc, forming part of the Banking division; as such it operates as part of the broader Group in delivering its purpose and strategic objectives, in line with Group-wide processes, governance and culture 

Engagement supports the Company’s understanding of, and contribution to, broader Group activities and strategic aims, and ensures delivery of long-term sustainable value for our shareholder in line with Group policies and standards
Focus on broader Group purpose and strategic aims

Alignment with Group-wide risk, governance, compliance and financial priorities

Consistent approach to stakeholder considerations and outcomes 
Engagement with senior management at Group level, including representation on the Board and other governance forums to ensure the Board has a clear understanding of its role and contribution as part of the wider Group

Updates to Group level committees, including the Close Brothers Group plc Board on the operation and performance of the Company

Participation in Group-wide initiatives and programmes (including those that support consideration of the Company’s other stakeholder groups including customers, employees and suppliers)

Budget and financial plans developed as part of wider Group process

Participation in broader enterprise-wide risk, regulatory and compliance initiatives

Below are some examples of the ways in which the Board has engaged directly with stakeholders during the financial year, how stakeholder interests have been considered in the Board’s decision-making and wider role, and how the directors have had regard to the matters set out in section 172(1)(a)-(f) when discharging their duties under section 172.  The Company has a sole member, Close Brothers Limited, and as such the duty of directors to have regard to the need to act fairly as between members of the company is limited.

Principal Board decision: Covid-19 support to customers

The Board made a decision to support our clients during Covid-19 by continuing to lend and accept new loan applications, as well as granting forbearance to assist customers in temporary financial distress. Our response is underpinned by the Company’s long-term strategy and the Group’s purpose to help the people and businesses of Britain thrive over the long term. 

As part of its decision-making the Board had regard to the different interests of stakeholders but with an overarching focus, as required by section 172(1), on acting in the way that would be most likely to promote the success of the Company. The decision required a number of factors to be considered:

  • The immediate challenge faced by the Company was the practical and cultural shift to remote working and in this context maintaining high quality customer service that is safe for our workforce, clients and partners. 
  • The directors discussed critical business processes and put a plan in place to minimise disruption to key business activities. The plan considered the feedback received by employees given the importance of employee wellbeing and their ability to perform their roles effectively. This enabled the Company to continue lending and entertain new applications.
  • This was followed by extensive risk and financial assessments aimed at understanding the impacts to the long-term sustainability of the business. These assessments tested the resilience of the business model under different scenarios and identified alternative outcomes. 
  • In reviewing and debating the results, the directors also took into account the importance of maintaining high standards of business conduct and that the principles of Treating Customers Fairly are complied with. After due consideration, the Board concluded that it is in the best interests of the Company to continue lending and that the current underwriting should reflect the increased risk profile resulting from an uncertain economic environment. 
  • In formulating a solution for customers in temporary financial distress, the directors took account of client and lending team feedback to understand the issues. The Board’s aim in providing assistance is to benefit both the client and the Company by bringing the facility back into a satisfactory position. 
  • A variety of solutions have been modelled to ascertain the likely consequences of any decision in the long term. The directors concluded that customers requiring assistance should be managed individually. In line with industry practice, payment holidays are granted for 3 months or where an alternative form of assistance is granted, this is appropriate to the individual customer. 

The Board recognises the uncertainty around Covid-19 and continues to monitor the impact of its decision on the business and its stakeholders.

Principal decision 2: Evaluation of business premises

With the office lease expiring in early 2021, the directors, in conjunction with the Executive Committee, undertook an evaluation of the current workplace and alternative office spaces to determine the most suitable option for the Company’s business needs.

The Board had regard to the different interests of stakeholders but with an overarching focus, as required by section 172(1), on acting in the way that would be most likely to promote the success of the Company. The Board relied upon a combination of factors to inform their judgement: 

  • Early into the financial year, the Company performed a business and cost review of the current office premises which identified the need to move and upgrade premises. 
  • An inclusive and team approach was used to gather views and obtain support from staff, clients, and the local community. Feedback received informed the specifications required for the new office space.
  • Consultations with the Group’s Facilities department have been undertaken for additional guidance and this led to identifying a selection of suitable sites to choose from. Some members of staff have been invited to site viewings to give them opportunity to feed back their views to the Committee.

Later into the financial year, the Board saw and experienced significant changes to the workplace culture following Covid-19. As a result, additional considerations had to be made to respond to changing requirements. Whilst the current office environment had been adapted to allow our staff to work from home, the Board accepted the future shape of the workplace remains uncertain. To deal with this uncertainty, the Board made the decision to extend the current lease for another year to allow more time to form a medium to long term solution with regards to business premises.