Product Governance Is Becoming a Professional Liability Issue

The practical risk is straightforward. If a target market determination is poorly prepared, distribution controls are weak, client data is misread, or review triggers are ignored, the resulting harm may not sit neatly with the product issuer alone. Consultants, compliance specialists, outsourced reviewers, responsible managers, advisers and technology providers may all be drawn into a dispute if their work influenced the decision-making chain.

For small firms, the lesson is not to treat product governance as a template exercise. A document that looks complete may still be vulnerable if it does not reflect the real customer base, sales process, complaints patterns, claims experience or product complexity. Where an external professional has signed off, reviewed or advised on that framework, a later regulator query or client remediation program can quickly become an allegation about professional judgement.

This is where professional indemnity cover needs to be tested against the actual work being performed. Firms should check whether their policy description captures compliance consulting, product review, distribution monitoring, financial advice support, data analytics or outsourced governance work. They should also review exclusions, notification duties, retroactive dates and contractual indemnities, especially where clients expect the provider to absorb losses arising from documentation or process failures.

Key risk controls include:

• keeping clear evidence of assumptions, data sources and client instructions;
• recording why a target market, review trigger or distribution condition was considered appropriate;
• confirming who is responsible for monitoring complaints, sales outcomes and warning signs;
• updating engagement letters when the scope of work changes; and
• checking professional indemnity insurance requirements before accepting regulated or high-risk assignments.

For businesses preparing for renewal, this is also a timely moment to estimate a suitable limit in light of larger clients, higher-value projects or broader compliance responsibilities. Product governance failures can produce legal costs, remediation expenses, reputational damage and contract disputes long before a matter reaches court.

The broader message is that regulators are looking beyond whether a document exists. They are asking whether governance systems work in practice. Professionals who advise on those systems should make sure their records, contracts and insurance settings are equally practical.