This is a unique course, focusing on capital adequacy for investment managers and based on the Investment Association’s ICAAP guidance.
The Individual Capital Adequacy Assessment Process (ICAAP) and the stress and scenario testing (SST) of a firm’s capital is an important discipline that most managers and risk specialists in the sector should understand. The ICAAP and SST reports are the first documents that the Financial Conduct Authority (FCA) will assess before a Supervisory Review and Evaluation Process (SREP) visit and the quality of these will set the tone of the questions asked at the meetings. Further, the FCA will expect a firm’s senior management and board to understand the concepts and results of the ICAAP and the SST and to use them to manage the business.
The standards expected by the FCA are much higher than in the past and there is a high correlation between failed firms and the quality of their ICAAP and risk governance framework. Poor understanding of the ICAAP and SST can, at best, lead to higher additional regulatory capital requirements (at increased cost) and, at worst, the failure of the firm. In contrast, a good understanding can help to identify the risks to the business strategy and to optimise the use of capital.
Recognising the importance of the ICAAP, the Investment Association has produced detailed guidance for member firms and this course expands on this guidance and provides practical advice for implementation.
Key Learning Objectives:
Consider the main elements of an investment manager’s balance sheet and how these are related to capital
Understand why firms do not “hold” capital, the true nature of capital and why it is required
Be able to identify the key risks to an investment manager’s balance sheet and know how to embed capital management into business decisions
Know how to assess each key risk category in the ICAAP and how to choose an appropriate capital estimation approach
Understand the key principles, approach and drivers of Stress & Scenario Testing
Understand the key requirements of the wind-down and reverse stress testing processes