Risk management in the auto industry is an important process for dealerships to ensure that its factors — including their financial services license — are not revoked, platform crashes do not occur and other crises do not ensue. Reviewing the following key aspects of a risk management plan could be the difference between compliance and disaster.
An automotive dealership's risk management plan should have five main parts that are assessed, planned for and procedures in place for compliance. One of the most important aspects is the Conduct Risk Management Plan.
"The dealership’s risk management plan will be worthless unless all critical business operations have been identified and where the impact of any material disruption that could occur on each of these has been assessed," ACM Risk Consultants stated on their website.
A dealership's overall financial risk management plan should be based on compliance with the Treating a Customer Fairly (‘TCF’) objectives, as set by the Financial Conduct Authority (FCA) and built out as its conduct risk plan. The TCF is meant to be, and should be, embedded into all areas of a dealership's governance structure, according to ACM Risk Consultants.
It is the responsibility of dealership directors to deliver on meeting TCF objectives in addition to the key employees and F&Is. The TCF framework is broken down into two parts of focus. The first is the governing structures of a dealership and how the TCF outcomes are applied to its finance department and measured for delivery. The second focuses on how the TCF is introduced to customers or staff, standards and procedures for that introduction, and standards of monitoring.
Though it is the responsibility of the directors and key employees in meeting TCF objectives, dealerships should empower employees to be responsible for their own risk management and owners or managers should model good behavior while reinforcing "safety first" plus other main objectives of a dealerships plan.
Auto Success explains it is important for dealerships to know that no two businesses are alike, but some basics can be followed to maintain a risk management plan. A solid foundation of risk assessments and response procedures that a risk management plan is built upon is essential to the plan's success.
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