2.4.4 The Main Steps in Risk Assessment

Question 1

Main steps in the FCA’s risk assessment process:

Answer 1

1) FSF (Firm Systematic Framework): Preventative work through structured conduct assessment of firms
2) Event-Driven Work - dealing quickly with emerging problems/problems that have happened and securing customer redress when needed. This covers issues occurring outside the firm’s assessment cycle. uses better data monitoring and intelligence
3) Issues and Products - fast campaigns on sectors of the market or products within a sector that put customers at risk. Driven by a sector risk assessment that analyses what is currently causing poor outcomes for consumers and market participants uses data analysis, market intelligence and input from firms.

Question 2

1) FSF (Firm Systematic Framework): Preventative work through structured conduct assessment of firms

Answer 2

Assesses a firm’s conduct risk and asks if the interests of customers and market integrity is at the heart of a firm’s operations. Does this by using a common framework across all sectors, which is targeted to the type of firm. Common features involve

-BMSA, to give a view on how sustainable the business is in respect of conduct, and where future risks may be

• assessment of how the firm embeds fair treatment of customers and ensured market integrity in its operations. This assessment includes
  1) Governance and culture, assessing ow a firm identifies managed and reduces conduct risks
  2) product design, are a firm’s products meeting customer needs and targeted accordingly
  3) sales/transaction processes, assess a firm’s systems and controls
  4) post-sales services nd transaction handling - assess how a firm ensures its customers are treated fairly after POS, service or transaction, including handling complaints
• Deciding what actions re required by the firm to address issues
• communication to the firm, settin`g out the assessment ac required actions

Question 3

2) Event-Driven Work - dealing quickly with emerging problems/problems that have happened and securing customer redress when needed. This covers issues occurring outside the firm’s assessment cycle. uses better data monitoring and intelligence

Answer 3

fewer supervisors allocated to specific firm frees resources for situations where in firms where there is a heightened risk to customers, or where consumers have experienced loss and quick action is needed

Question 4

3) Issues and Products - fast campaigns on sectors of the market or products within a sector that put customers at risk. Driven by a sector risk assessment that analyses what is currently causing poor outcomes for consumers and market participants uses data analysis, market intelligence and input from firms.

Answer 4

Flexibility in use of supervisors means FCA can react to emerging issues and carry out more reviews on products and issues across a sector/market. FCA Uses sector risk Analysis (SRA) to assessment the conduct risks across a sector, This complete,ents firm-specific work so together they can identify risks FCA uses a range of data, if and intelligence from firms, consumers nad trade bodies to identify biggest risks and prioritise work

SRA’s used to answer:

1) what are the cross-firm product issues that re behind poor outcomes for consumer and endanger market integrity
2) What is the degree of potential harm
3) What is the discovery or mitigation work proposed?