Our 2023 risk management and financial resilience survey for wealth and asset managers focuses on the design of Risk and Compliance functions, evolving areas of regulation (ESG, DORA, fund liquidity risk and the Consumer Duty) and financial resilience under the Investment Firms Prudential Regime.

Risk and Compliance functions

The top risks firms are most focussed on are ESG, regulatory change and market uncertainty. In response to these, we have recently observed a trend of investment managers re-assessing their approach to the design of their Risk and Compliance functions. This can be driven by a wide variety of factors, ranging from significant growth in an organisation through to firmwide efforts to increase efficiency and reduce duplication across the lines of defence. The survey includes benchmarking of industry approaches to this challenge.

Nearly 70% of our survey participants would consider deploying new and emerging technologies within Risk and Compliance functions. Many respondents are keen to explore how AI tools may be adopted. Specific examples include using AI to perform regulatory horizon scanning and outcome testing. 

Evolving areas of regulation

Our survey does deep-dive analysis on four key areas of regulatory change: ESG, DORA, fund liquidity risk and the Consumer Duty. These are all top of the agenda for wealth and asset managers. Across each of these we assess the key areas firms are focussed on to successfully implement regulatory change programmes. 

Financial resilience

24 months since the implementation of the new Investment Firm Prudential Regime, the FCA have performed their first round of supervisory reviews under the new regime. Significantly fewer firms appear to have been issued additional capital requirements compared to the new regime; in 2020, we observed that 89% of SREPs resulted in firms receiving capital guidance, under the IFPR this has decreased to only 33%.

A common thread across all the FCA’s feedback to firms is the importance of wind-down planning. All firms are in-scope of wind-down planning and this is the top area of weaknesses identified by the FCA during supervisory reviews.  

Download the Risk management and financial resilience in wealth and asset management report here.