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FCA publishes its Business Plan including risk outlook for 2015/2016

June 25, 2015 - Regulatory Updates

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The FCA has published its Business Plan for 2015/2016 including the risk outlook, which is a new addition this year. This is a key document that all regulated firms should become acquainted with as it addresses the main areas of regulatory focus and key risks identified for the forthcoming year.

Below is a brief summary of the business plan but to read it in detail please click on this link:

a) Risk Outlook identifies seven forward-looking areas of focus which the FCA believes could be a risk to consumer protection, market integrity and competition. The first six were from the previous year with the seventh replacing the concern of house prices:

1. Technology

2. Culture and controls (including conflicts of interest)

3. Large back-books which might mean that firms act against the best interests of the customer

4. Pensions/retirement income products and distribution methods

5. Risks of unfair/unaffordable debt (poor practices within consumer credit with regard to affordability assessments)

6. Unfair contract terms and conditions

7. Importance of systems and controls in preventing financial crime

b) Categories and key areas of risk: The FCA has identified some social and environmental factors that are key drivers for risk either on a medium or longer term basis. These are broadly grouped into the following categories:

- Business Conduct: The areas covered include: Culture in Firms, Consumer Behaviours, Conflicts of Interest, Financial Crime and Unfair Contract Terms. 

- Policy, legislation and regulation: The FCA will continue to have an active engagement with Europe to influence, shape and implement the regulatory changes that are occurring on an international level. Areas under this category include: EU and international, Market Infrastructure, Prudential and Shadow banking.

- Domestic Policy: Areas of particular interest to the FCA are Pension Reforms and Consumer Credit.

- Economic and Market Trends: Developments in the economy and financial markets play a role in influencing consumer behaviours and decisions, as well as firms’ business models, strategies and financial soundness. These affect the financial markets and regulated activities.

- Social Factors: These include the ageing population, older consumers and younger consumers. - Technological challenges: This area of focus will examine the following risks: Innovation in on-line and web-based channels, cyber-crime, complex systems with intermediaries and/or gatekeepers, failure to invest and maintain systems and the risk that poor conduct from inadequate investment in systems that firms use to undertake, monitor and control business, or to have robust business continuity plans in place, lack of which could lead to harm the customers.

FCA Strategy: As detailed in our January newsletter the FCA has outlined its new strategy and has incorporated this into the business plan. The core objective of the FCA remains to ensure that markets work well but to do this the FCA will focus on key priorities whilst remaining flexible to deal with issues as they arise. The strategic themes outlined in the business plan are:

1. Sustainable model of regulation,

2. Common view of markets and sectors,

3. Priority settings,

4. Strategic approach to risk,

5. Engaging and influencing,

6. Increase internal ability to be flexible,

7. Making most of resources.

Key Priorities: The priorities of the FCA will focus on the following key areas to ensure that the strategic and operational objectives are achieved. These key areas are grouped under the following areas: Strategic Market-led Approach, Protecting Consumers, Individual accountability, International issues and people.

What does this mean for you and what should firms be doing?

All regulated firms must address, review and implement the key risk areas outlined above. Many firms will have reviewed the relevant risks already, and implemented procedures to manage those risks. For others, risk management of all or some of the above topics will be a new task where specific, practical expert solutions may help implementing measures quickly and securely.

Lawson Conner, as experts in regulatory risk management we offer our clients a suite of tools and products helping them to stay compliant and implement the necessary changes in their organisations. Please contact us if you need any further information.

Andrew Frost
Director, Investment Management Services


Joe Woodbury
Director, Investment Management Services