Monitoring: own business operations and consumer lending

Table of Contents

• Overarching principles and guidelines
• Example indicators
• Case studies and further reading

Financial institutions, like any other business, should implement systematic monitoring processes through which to track human rights risks and impacts associated with their business and financing activities. 

With respect to own operations, financial institutions can implement systematic monitoring and reporting in relation to human rights commitments in order to:

• Track human rights risks and support public communication efforts
• Assess the effectiveness of human rights due diligence and risk management / mitigation measures in relation to own business operations
• Meet regulatory requirements in contexts where human rights monitoring and reporting is an explicit regulatory requirement.

In many cases, existing data collection and evaluation frameworks can already provide, or can be modified to provide, relevant input into human rights monitoring, for example human resource data. These data can also feed into ongoing human rights due diligence activities and inform updates to relevant risk management and mitigation measures. Effective monitoring requires a combination of indicators through which to assess evolving risk profiles and identify specific impacts. Strong indicator frameworks typically incorporate the following elements:

Overarching principles and guidelines

The following principles and guidelines can help to shape relevant indicators:

• Integrate with existing systems: in many cases, human rights monitoring can be integrated into broader data collection, evaluation, and reporting processes. Conversely, financial institutions should include data on human rights performance as part of their regular reporting on both their own-business operations and financing performance.
• Assign responsibilities: clearly establishing internal responsibilities for human rights monitoring that are expressly incorporated as core job responsibilities and associated with corresponding performance indicators and targets. Importantly, these responsibilities should be integrated across different teams.
• Standardise data management tools: standardisation can help ensure effective and efficient monitoring. For example, a simple client / investee (self-)reporting tool can help standardize basic data collection on key human rights indicators (although additional forms of monitoring will be required for higher risk investment contexts). Where possible, requirements to collect and manage data should be integrated into contracts.
• Tailor monitoring intensity: monitoring and reporting activities should be appropriate to the nature and level of risks identified. High-risk clients/investees may be subject to more frequent and detailed monitoring (including site visits).
• Review and adapt: monitoring frameworks should be regularly assessed against the evolving risk profile of the business activity or investment and adjusted accordingly.
• Engaging stakeholders: monitoring efforts can benefit from ongoing stakeholder feedback, including both internal and external sources (e.g. affected or potentially affected stakeholders). This can ensure that measures are relevant and continue to be effective. Further information is included in the section on ‘Stakeholder engagement.’

Example indicators

For most financial institutions, monitoring and reporting on own-business operations will include a focus on risks and impacts related to human resources and procurement. Institutions that provide personal lending and other consumer banking services will also need to collect, analyse, and report on data concerning the potential impacts of these services on customers and stakeholders and how those impacts are being addressed. Wherever possible, quantitative indicators should be supplemented with qualitative indicators. A brief overview of example indicators can be found here (PDF).

Case studies and further reading