Prudential Management & Regulatory Reporting

ICARA Support Services

Contact us today

Michael Chambers

Michael Chambers

    *See our Privacy Policy to learn how we use and protect your information.

    At the core of the Investment Firms’ Prudential Regime is the Internal Capital Adequacy and Risk Assessment, or ICARA process.  This builds on the formulaic requirements set by the regime on capital and liquidity.

    The ICARA process replaces the ICAAP for some firms and encompasses aspects of internal governance with a particular focus on risk management systems, processes and controls and a thorough assessment of financial resources.

    It should be the centrepiece of a continuous risk management process.

    Business Model Assessment, Planning and Forecasting.

    Firms should be able to forecast capital and liquidity needs, both on an ongoing basis and in the event of winding-down and:

    • demonstrate an understanding of the risks to their profit making abilities
    • look ahead to evaluate how plausible scenarios could affect their ability to maintain sufficient capital and liquidity resources
    • outline the systems and controls in place to identify, monitor and mitigate harms.
    • capital and liquidity should be assessed where these are not adequately mitigated through systems and controls. Are additional capital and liquidity resources required?
    • consider the risks caused by the whole business – including non-MIFD activities.

    Centralis Governance Risk & Compliance services

    Centralis ICARA experts assist clients in developing, implementing and documenting robust processes, including:

    • Assistance with developing and/or documenting a risk management framework, including:
      • Risk appetite, identification, and assessment
      • Mapping to effective policies and procedures
    • Robust monitoring, reporting and escalation protocols
    • Orderly wind-down planning
    • Production of financial and regulatory capital forecasts
    • Pillar 2A assessment quantifying additional risks not fully covered under Pillar 1
    • Pillar 2B assessment – stress and scenario testing
    • Production of a final report

    Recovery Action Planning

    The FCA wants to see evidence that firms have early warning indicators and triggers, with plans in place to restore capital or liquid resources should thresholds be at risk of breach.

    Firms should also include comprehensive wind down plans with triggers, timelines and scenarios where different resources might be needed.

    The ICARA process is detailed and can be complex. As the central part of the whole regime, it’s worth spending time and effort to get the underlying processes right.

    Latest News

    28 November 2022 • Governance Risk & Compliance

    ICARA in action: observations from year one of the new regime

    It’s nearly a year since the ICARA regime was first introduced in the UK by the FCA, replacing the ICAAP framework that was part of the previous prudential regime. The purpose of the ICARA process rules – which are applicable to MiFID investment firms – is to ensure that investment firms identify and mitigate the […]

    21 March 2023 • Governance Risk & Compliance

    The making of the UK new regulatory framework

    As the UK moves toward a new financial environment post-Brexit, the FCA is beginning the process of shaping the new regulatory regime and is open to feedback from fund managers and investors through its latest discussion paper, which it will use to create an accurate picture of what investors and funds really want. The modernisation […]

    16 March 2023 • Governance Risk & Compliance

    Increased regulatory focus on anti-money laundering non-compliance – is your investment fund prepared?

    Regulators globally are placing increased focus on the identification of anti-money laundering (“AML”) control deficiencies and Know Your Customer non-compliance. This places even more scrutiny on the AML officers who are charged with ensuring that an AML framework is robust and at all times compliant with jurisdictional AML regimes. In the alternative investment funds space, […]
    The Team

    Meet the ICARA Support Services team

    Michael Chambers

    Group Head of Prudential

    UK