Risk and ICAAP benchmarking survey 2016

Risk and ICAAP benchmarking survey 2016

Our 2016 benchmarking survey, ‘Continuing the journey’, reveals that while investment firms’ risk management and ICAAP practices have become more sophisticated, there are still further opportunities to improve.

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Almost 50% of investment firms visited by the Financial Conduct Authority (FCA) over the last year were advised that risk governance and culture should be their key concern. Yet as our report shows, approaches to risk management differ widely across the industry and there is a lack of engagement at executive level. 

Last year, our study revealed how investment firms could benefit from getting their Internal Capital Adequacy Assessment Process (ICAAP) submissions ‘right from the start’. This time, we have delved deeper, not only looking at a comparable number of firms and their ICAAPs, but also examining their underlying risk processes – how they identify, assess, monitor and report risk.

This year we worked with ORIC International, the world’s leading provider of operational risk data, to provide deeper insight into current risk management practice among investment firms. ORIC International provides benchmarks, best practice insights, undertakes leading-edge research for operational risk, and provides a forum for members to exchange ideas and experiences. 

Key Highlights:

  • This report analyses the survey responses and Internal Capital Adequacy Assessment Process (ICAAP) documents from 31 investment firms, managing clients assets ranging from £5bn to £300bn.
  • More than a third of investment management firms have no plans to consider the impact of Brexit in their stress testing analysis. Whilst most plan to include it at some point, only 16 percent of firms have so far considered Brexit in their ICAAP and just a third of firms have considered it as part of their stress testing.
  • Our report also finds that only 23 percent of boards are taking direct responsibility for selecting the risk information that gets escalated to them, despite the fact that wider risk issues were identified as a key concern in 88 percent of FCA visits. This lack of board engagement often results in risk being side-lined and not integrated into firm wide operations or seen as a priority function.

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