ICAAP

All MiFID (and CRD) firms must carry out an ongoing assessment of the firm's risks, how the firm intends to mitigate those risks and how much current and future capital is necessary to cover these risks having considered other mitigating factors. This is required by the FSA as a way of ensuring that MiFID (and CRD) firms are managing the risks in their business effectively

This ongoing process is referred to as the 'Internal Capital Adequacy Assessment Process or ICAAP by the FSA.The purpose of the ICAAP document is to

1. Inform the Board and;
2. Explain to the FSA

it's internal capital adequacy assessment process.

All MiFID (and CRD) firms must carry out an "ICAAP" to ensure that they are managing their risks adequately.  This is a sophisticated process combining the front office/business, finance, risk management and compliance functions to create the ICAAP document and solution. The input of senior management is also critical.  It is vital that senior management participate in the ICAAP process to understand the full range of risks their business faces and to mitigate against them. Whilst the ICAAP is an on-going process, ICAAPs must be formally reviewed annually. Additionally if the firm's scope of business activities changes or the firm plans to undertake new business transactions, the ICAAP must be re-visited to include the additional risk assessment that will arise in the light of the new changes.

Compliancy Services can manage your ICAAP process with you, liaising with you every step of the way to ensure that a comprehensive and  robust process is carried out.  Our consultants have carried out many ICAAPs with a broad range of firms, from banks to small investment managers and we employ a specialist regulatory accountant (who previously managed the ICAAP calculations at several leading banks) to prepare the financial element of the document.

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