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Section 172(1) Statement

Novitas Loans Limited

The directors of Novitas Loans Limited (the “Company”) 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 member(s) 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. 

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 of directors (the “Board”) were updated to remind the directors of their legal duties including under s.172 of the Act, and the directors also received refresher training on their s.172 duties. 

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 is part of Close Brothers Group Plc (“CBG”), and as such it 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, CBG.

The directors seek to engage directly with stakeholders wherever possible on certain issues,  however the size of CBG 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 CBG.

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

Customers, clients and partners

Why we focus on them and the impact of engagement

  • 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  CBG’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

Stakeholders' key priorities and areas of focus

  • A customer-led proposition
  • Strong personal relationships and specialist expert knowledge
  • Consistent customer service in all market conditions
  • High service levels and flexible solutions

How the board and management engage and consider stakeholder interests

  • 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 and Voice of the Customer programme
  • 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


Employees

Why we focus on them and the impact of engagement

  • The 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

Stakeholders' key priorities and areas of focus

  • 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
  • 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

Suppliers

Why we focus on them and the impact of engagement

  • Our business is supported by a large 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

Stakeholders' key priorities and areas of focus

  • Appropriate and clear payment procedures
  • Strong and sustainable relationships with Close Brothers
  • Workable operating requirements

How the board and management engage and consider stakeholder interests

  • Meetings and other engagement with suppliers and ongoing updates on performance, including through the broader Close Brothers Third Party Management function (“TPM”)
  • Engagement with key suppliers during the Covid-19 pandemic
  • Review and consideration of material contracts with suppliers and ongoing supplier relationship management through TPM
  • Established processes for the management of supply chain risks and issues, with escalation to the Board and management as appropriate

Regulators

Why we focus on them and the impact of engagement

  • Engagement with regulators and applicable regulatory requirements helps 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

Stakeholders' key priorities and areas of focus

  • Fair treatment of customers and clients
  • Awareness of evolving regulatory landscape
  • Recognition of the importance of resilience and risk management
  • Recovery Resolution Plan
  • Climate change
  • Sustainability strategy
  • CBG tax strategy

How the board and management engage and consider stakeholder interests

  • 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 CBG regulatory initiatives and programmes, including activity to support the ICAAP, RRP and ILAAP processes
  • Oversight of training for all employees on applicable regulatory requirements

Communities and Environment

Why we focus on them and the impact of engagement

  • As part of the CBG, 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

Stakeholders' key priorities and areas of focus

  • Strategy or approaching sustainability issues
  • Support for community initiatives

How the board and management engage and consider stakeholder interests

  • Actively encouraging employees to contribute to community and charity events and to fundraise and volunteer for charities, including CBG’s charity partners
  • Board and management participation in local charitable and volunteering activities
  • Participation in CBG’s SME Apprentice Programme
  • Consideration of CBG’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


Shareholder

Why we focus on them and the impact of engagement

  • The Company is a wholly owned member of CBG, 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 CBG policies and standards

Stakeholders' key priorities and areas of focus

  • 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 

How the board and management engage and consider stakeholder interests

  • Engagement with senior management at CBG 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 CBG 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.

Investment in technology

The decision to invest significantly in technology in the year was driven by our desire to improve security for our customers, suppliers and intermediary parties, and enhance our integration capabilities with third parties.  Multi factor authentication has been added to the loan management system portal for solicitors, as an added security measure. Other improvements made to the system have improved usability for employees, allowing them to work more efficiently and with better controls. Work commenced this year on a middleware solution for the loan management system that is designed to allow smoother transfer of data between the Novitas system and our main intermediary partner. The automated nature of the middleware will facilitate transfers of a greater volume of data, giving us greater insight into how funded cases are being handled and progressed. Reduced reliance on manual reconciliation will free staff to work on more value adding activities.

Family stakeholder engagement 

The strategic decision was taken this year to focus on improving stakeholder experience and increasing engagement within the Family product. Solicitor firms on the Novitas panel were assigned a dedicated Account Executive, to strengthen the relationship and give them a clear channel of communication. The business invested in Salesforce to enable monitoring of sales activity and assessment of where efforts were resulting in higher conversion rates. Having this visibility meant Account Executives were able to focus their efforts more efficiently, they were motivated to re-engage and increase the number of interactions with firms that would most benefit; the result being an improved level of service for solicitors and our employees having a valuable sense of ownership. Marketing collateral was further developed, including offering in house training for solicitors, to drive awareness of both the product and what is required during the application process, ultimately leading to better outcomes for clients in need of funding.

Our response to Covid-19

While Covid-19 has had a significant impact upon consumers, businesses and the economy, our strong operational resilience has allowed the Company to continue to operate effectively during this time. 

Our purpose is to help the people and businesses of Britain thrive over the long term, and in this challenging period our colleagues have continued to focus on helping our customers and clients with dedicated service and expertise.

The majority of our loan book is structurally protected and conservatively underwritten. With the support of  Close Brothers Limited we have a strong funding and liquidity position and are well placed, both operationally and financially, to navigate this rapidly evolving environment.

The support we offer to all our stakeholders has been at the forefront of the board of directors’ minds during this time, and the board has held several additional ad-hoc meetings since the beginning of UK lockdown in March to focus on the impact of Covid-19 on our key stakeholder groups. The frequency of meetings increased to a weekly basis at the peak of the lockdown, and the directors received regular updates on developments relating to individual stakeholder groups. 

Supporting our colleagues

The safety and wellbeing of our colleagues is of the utmost importance to us, and we have supported them through flexible working arrangements, seeking regular feedback and making adjustments so that they can conduct their roles safely. A number of our staff have now returned to work on-site or begun to meet customers in person where it is safe to do so, but the majority remain successfully working from home, where our robust systems and technology have enabled them to perform their roles with minimal disruption and to serve our customers and clients effectively. We have not made use of the Coronavirus Job Retention Scheme as none of our employees were furloughed during this period.

Supporting our customers

Throughout this period, we have maintained regular contact with our customers and increased their choice of channels for engagement with us, while our technology has ensured speed and simplicity in responding to their needs. We have offered forbearance and other support to customers and clients who find themselves in difficulty.  

Positioning the Company response

Throughout this period, we have continued to closely monitor and adhere to regulatory guidance in response to Covid-19 and the support for our employees, customers and shareholders during this time. Our risk management processes remain robust, and our strong internal controls ensure that we remain confident in our management of the impact upon our business activities. 
While it remains too early to know the full impact that Covid-19 will have on the UK economy, we are confident that our business model and the deep experience of our people leave us well prepared to respond to the challenges and opportunities ahead, protect our colleagues, and continue supporting our customers and clients.