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Close Leasing Limited: Section 172 Statement

Section 172(1) Statement and statement of engagement with other stakeholders

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 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.

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 fostered the Company’s business relationships with customers, employees, suppliers and others, including 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 directors also received refresher training on their s.172 duties and the terms of reference for the Board will be 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 is part of the Close Brothers Group (the “Group”), 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 financial statements 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

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 hear of our business is critical to our success, and  The Company’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

  • 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

How the board and management engage and consider stakeholder interests

  • 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 CBG-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

 

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

 

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
  • Annual Supplier 360 degree survey to seek feedback from relevant suppliers
  • 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

 

Communities and Environment

Why we focus on them and the impact of engagement  

  • As 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 our 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 on 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 the broader Group’s charity partners
  • Board and management participation in local charitable and volunteering activities
  • Participation in the wider Group’s SME Apprentice Programme
  • 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

 

Shareholder

Why we focus on them and the impact of engagement  

  • The Company is a wholly owned member of the Close Brothers Group (the “Group”), 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

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 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

 

Case studies

Below are two 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.

Relaunching the Company’s vision and values

Employee engagement remains a key priority for the board and engagement levels are actively monitored by seeking feedback from employees via annual employee opinion surveys. Following a review during the year of the most recent employee opinion survey results which indicated high levels of staff engagement across the business, the board considered the important role that it plays in establishing and monitoring the Company’s purpose, culture and values, and in ensuring that employees feel valued and supported. 

As part of this discussion, the board took the strategic decision to relaunch its vision and values principles across the business, entitled ‘Thrive’, in order to maintain the high levels of employee engagement and to continue to foster the right culture.

Stakeholder considerations, and the factors set out in section 172(1), were at the heart of the decision-making process.  As part of their decision making, the directors considered that driving the right culture throughout the business would be pivotal to the success of the Company in the long term.  The new vision and values would also help define how employees in the business are expected to behave with each other, with customers, suppliers, and other stakeholders. This would enable the Company to maintain its reputation for high standards of business conduct as well as helping foster successful business relationships with its stakeholders and among colleagues. The directors also considered that engaged employees are more likely to remain enthusiastic about their work and the organisation, and to remain committed to supporting customers, clients and other stakeholders.

COVID-19 support to customers

COVID-19 has presented many challenges for multiple stakeholders of the Company. In response to the challenges faced, the directors made the key decision to support their customers, by granting additional financial assistance to those who had experienced temporary financial difficulty and to continue to accept new loan applications from both existing and new customers. This decision was underpinned by the Company’s long-term strategy and purpose to “help the people and businesses of Britain thrive over the long term”, and the positive impact that this brings to the wider community.

Stakeholder considerations, and the factors set out in section 172(1), were therefore at the heart of the decision-making process. The immediate challenge faced by the Company was the practical and cultural shift to remote working whilst supporting our employees and continuing to maintain high quality customer service for our clients and partners. As part of their decision making, the directors discussed critical business processes, and plans were established to minimise disruption to key business activities, and to facilitate home working for staff. Regular engagement was maintained with all staff to support them as they adapted to working from home.

In determining to which customers to grant additional financial support, the directors also had regard to the desirability of the Company maintaining a reputation for high standards of business conduct, and the Company agreed specific criteria that customers would need to demonstrate whilst ensuring that the Company acted as a responsible lender.

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