What is an ICARA?

The IFPR introduced a new capital adequacy and risk assessment framework for investment firms - the Internal Capital and Risk Assessment (ICARA). Previously, IFPRU and BIPRU firms already carried out their own assessments of the risks that they face and the amounts of capital that they deem sufficient to meet those risks, if they were to arise, called the Internal Capital Adequacy Assessment Process (ICAAP). Following the implementation of IFPR, ICAAPs were replaced by the ICARA and all firms regulated under the IFPR are required to have an ICARA. This meant that some firms had to implement these processes for the first time, whilst others needed to adapt to meet the ICARA requirements. Firms may need to provide their documentation to the FCA during the course of a supervisory review and evaluation process (SREP) visit or through the course of other regulatory interactions. Where weaknesses in firms’ governance and risk management processes are identified, this could lead to them being issued with individual capital or liquidity guidance, increasing the financial resources they are required to hold.

How we can support you

Whilst the ICARA is similar in some respects to the ICAAP, there are a number of material differences. Perhaps the most significant differences are the requirement for a wind-down plan and the Firm’s own assessment of the potential harm they pose through carrying out their activities. The FCA have made it clear that the ICARA should not be treated as a once-a-year exercise with mere senior management sign-off. Instead, it is expected that senior management lead and be fully involved in the ICARA process and that this forms part of ongoing governance and risk management processes.

We have assisted many clients and spoken to a large number of firms on the implementation of IFPR through our series of webinars on the topic, and it has become clear that firms continue to face challenges in either adopting the new rules or adapting their existing ICAAP to the new ICARA process. We have multiple service offerings to help firms with their ICARA, including providing a review of the ICARA and providing recommendations for enhancement, guidance templates and workshops to help Firm’s develop their own ICARA, or assisting in developing and implementing the ICARA process and required documentation.

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We can help firms with their ICARA, as follows:

Assist firms in developing an ICARA

We will:

- Provide firms with an ICARA guidance document and template setting out each of the key components of the ICARA and an overview of the key considerations for management, including guidance on the requirements and what information should be captured within each section;

- Facilitate an ICARA overview workshop. In this session we walk through the template document and assist firms in developing their harm and risk assessment and provide guidance on how to model risk scenarios and stress testing;

- We will review the final draft ICARA document; and

- We will review the draft MIF007 return prior to submission.

ICARA annual review

We will:

- Review a firm's ICARA document and update it with any business changes;

- Roll-forward a firm's financial forecasts and capital calculations;

- Provide high-level recommendations in respect of enhancing the ICARA process based on our experience and market practice;

- Complete a draft MIF007 return for review; and

- Arrange for submission of the MIF007 following approval of the ICARA.


Why choose Cosegic?

Our 360 degree perspective of regulatory affairs


Our 360 degree perspective of regulatory affairs

Our wide range of financial sector experts come together on a regular basis to discuss their interactions with the FCA and the regulatory trends that they are seeing, providing us with a more informed understanding of the FCA than our competitors.

Direct, proportionate advice


Direct, proportionate advice

Our unique perspective means we really do have our fingers on the pulse of regulation, which helps us to ensure that the advice we offer is practical, helpful and directly proportionate to our clients’ needs.

Our understanding of the role of compliance in firms


Our understanding of the role of compliance in firms

We have watched the evolution of compliance over the past twenty years and understand that compliance must now become a core part of how financial services carry out their businesses in order for them to be successful.

Compliance confidence for visionary growth


Compliance confidence for visionary growth

In recognising this, our services have been built in a way that can help you navigate regulation ensuring you will keep your vision and objectives intact. Our breadth of experience allows us to balance your business objectives with your compliance requirements.

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