Declan Hourican is Chief Financial Officer at TSB Bank. He was previously CFO at Tesco Bank, and held a number of Senior Finance roles at RBS. Here, Declan highlights opportunities for banks to tackle fraud and protect their customers, and shares his thoughts on how to embed a sustainability focus within businesses. This interview was conducted as part of our research inquiry into the role CFOs will play in creating a fairer future.
How do you embed a sustainability focus? And what can the CFO do to support this?
A key part of our strategy at TSB is our Do What Matters Plan, which serves essentially as our responsible business plan. We were also the first retail bank to be accredited by the Good Business Charter. To embed this focus throughout the organisation, we spend a lot of time communicating the strategy and split the Do What Matters Plan into objectives that relate to people and to planet. These then become part of the measures of how people are incentivised and performance is evaluated.
The CFO can play a key role in raising the profile of sustainability and responsible business simply by being a visible part of the debate. I’m a part of our steering committee for the Do What Matters plan, and I’m actively involved in planning and setting our objectives. Crucially, the CFO must be able to clearly articulate the business case for pursuing these objectives. As the ultimate holder of the purse strings, they have an opportunity to demonstrate commitment to these aims in investment allocation. For example, last year we made a medium-term commitment towards the decarbonisation of our property estate – and in making that investment we further demonstrated our commitment to sustainability and set the direction for the business to go in.
“The CFO must be able to clearly articulate the business case for pursuing these objectives.”
How do you measure progress?
We are constantly monitoring our internal people metrics – we keep an eye on things like employee engagement, diversity and inclusion, and staff turnover, to build up a picture of how colleagues are feeling and to highlight areas that need attention.
One area where we are looking to improve our data is around environmental measures, especially around consumption. We want to build a better picture of what exactly we, our suppliers, and our customers are consuming and how this impacts the environment – but also how that is changing over time, and what we can do to make a positive difference in the right direction. We are also thinking about the climate effects on our business, and carry out stress testing to make sure we understand the impacts and are on the right track to address.
What do you think are the biggest challenges facing CFOs today?
One question on the minds of every CFO at the moment is very simple: "What do the next 12-24 months look like?" Or even, "What does next week look like?" The scale of volatility in the macroeconomic environment today is significant, and looking at that, CFOs will be greatly concerned how they are going to help their organisation navigate that period of intense uncertainty and difficulty. Once you add in persistent inflation and the interest rate environment that picture becomes even more serious. The impact of this on consumers and employees has been pronounced. In the context of an inflationary environment where you need to offer competitive remuneration to attract and retain talent, it will be of great concern to CFOs simultaneously trying to balance that with ensuring the organisation is sustainable and profitable.
“One question on the minds of every CFO at the moment is very simple: what do the next 12-24 months look like? Or even what does next week look like?”
What are the key societal or economic issues that keep you awake at night?
Fraud is rising at an alarming rate in the UK, and it is absolutely crucial that government and business work together to tackle this. Scammers generally look for any vulnerability, and in the current environment often present their scams on social media or elsewhere as, say, an investment opportunity in crypto and thereby prey on vulnerable people. It causes a great deal of severe emotional and financial distress for people, and banks must do all they can to prevent this from occurring.
One way for banks to help address this is to offer a fraud refund guarantee to put innocent victims right and prevent unnecessary harm to customers. I’m really proud that, currently, TSB are the only UK bank to offer this kind of scheme. But we can’t fight fraud on our own, we need all stakeholders involved to try to step up and tackle it. We need co-ordinated efforts from banks, from government and, most urgently, from social media companies.
“We need co-ordinated efforts from banks, from government and, most urgently, from social media companies.”
Setting up a fraud refund guarantee scheme is an opportunity for businesses to develop deeper relationships with customers, and also to demonstrate a genuine commitment to them and their wellbeing. Not only is this the right thing to do, but a simpler way to do business, as a bank refusing a refund may often end up with the Financial Ombudsman and the bank having to pay out anyway. Is it really worth putting your customers through additional pain during a stressful time only to end up reimbursing anyway? What is the point of that?
What are the biggest barriers in the way of businesses acting sustainably?
I think one of the biggest for us is working out how we effectively support our customers and suppliers in reducing their carbon footprint; we have a plan for how we will reduce ours. For our customers, the biggest source of carbon emissions is their houses, but to help them we need a cohesive plan from government. Currently, we’ve got disparate efforts around heat pumps and insulation, but this needs to be pulled together into a single plan of action.
Although newer housing stock is improving energy efficiency across our mortgage book, I’m worried that older housing stock will become even more difficult to mortgage in due course, given requirements to obtain energy efficiency ratings. Again, that needs co-ordinated effort from the banking industry, housebuilders, and the government to come together and work out a plan to address this in a way that doesn’t further exacerbate affordability issues.