Fast Growing Firms – Scale your Risk & Governance Capabilities with Grath📈

Scale your Risk & Governance Capabilities with Grath📈

Recognising that firms can face challenges in meeting their regulatory obligations during the first few years after authorisation, the FCA launched the Early & High Growth Oversight Programme. Calling for closer supervisory oversight to address any concerns identified and ensure growth is sustainably taking place, identifying harm and misconduct more efficiently, removal of problem firms and to increase market confidence and competition.

Following a successful pilot, this programme has been expanded to 300 newly authorised businesses, which receive enhanced supervision as they get used to their regulatory status, supporting them to understand their obligations as they grow.

Firms do not need to apply to be part of Early and High Growth Oversight. The FCA will contact firms directly if they are to be included.

Regarding fast-growing firms, the FCA employs several strategies to ensure they are appropriately supervised and monitored.

Of course, the primary way in which the regulator oversees fast-growing firms is by requiring them to register with the FCA and obtain the necessary authorizations before conducting business. Authorisation allows the FCA to monitor the activities of firms and ensure they comply with regulatory requirements.

The FCA also conducts regular supervisory visits to fast-growing firms to assess their operations, systems, and controls. The FCA can then identify potential risks and ensure that firms manage them effectively.

In addition, the FCA requires fast-growing firms to provide regular financial reports and other information, helping the regulator monitor the firms’ financial stability and identify potential consumer risks.

The FCA also has the power to take enforcement action against fast-growing firms if they breach regulations, including fines, sanctions, and even begin criminal proceedings if necessary.

Overall, the FCA is essential in overseeing fast-growing firms to ensure they operate safely and competently, protecting consumers and maintaining the financial system’s stability.

The FCA has outlined the following areas for consideration by such firms:

• Robust plans must be in place to understand and accommodate future growth and to maintain sufficient resources to manage growth or unexpected stress. While firms may have adequate risk management practices at the authorisation stage, risk management practices must evolve in line with business growth.
• Risk management frameworks and governance arrangements must be continually managed to ensure they remain proportionate and fit for purpose. 
• The assessment of financial resource adequacy must continue to be commensurate with the business’s size, complexity, and forecasted growth, including regular stress testing and scenario analysis that is proportionate in nature. 
• A liquidity risk management framework must be embedded, including liquidity risk policies, controls, contingency funding plans, and stress testing.
• The wind-down plan will be robust and mitigates a disorderly exit from the market.

Where Grath can help

Central to its multi-firm review, the FCA’s early feedback found firms deficient in risk management and governance arrangements, including insufficient staff resourcing requirements in risk, compliance, and audit functions. Further concerns referenced inadequate business plans, internal capital adequacy assessment processes (ICARA) documents, and wind-down plans.

Grath can support newly authorised firms to scale their governance and risk activities proportionately, ensuring staff resources are effectively used so that they contribute to value add activities while reducing administrative burden. Firms with a significant regulatory scope can easily navigate complex sourcebooks and be alerted to updates in real-time, taking advantage of intuitive obligation management.

Capital adequacy and liquidity management can be routinely monitored, with stress testing regularly performed and evidenced through monitoring plans and tracked tasks through to completion using intelligent attestation management.

Wind-down plans can be operationalised in Grath, applying practical controls to ensure firms stay cognisant of early warning indicators and material wind-down events, requiring management intervention.

Want to strengthen your risk & control capabilities?

We’d love to talk if you’d like to know how Grath’s technology can help you.

www.grath.com/contact