What’s the best way to achieve that?

1. The ‘Overall Financial Adequacy Rule’ (OFAR) – Within the OFAR, you are required to hold sufficient capital and liquidity to cover your ‘own funds threshold requirement’ and ‘liquid assets threshold requirement’. When calculating the thresholds your firm must take into account the risks it incurs from ongoing operations and the assessment from wind down. A successful method is to integrate the OFAR monitoring into your monthly management processes, for example including capital and liquidity adequacy calculation in the management accounts. 
2. Projections and wind down costs – this can be an extremely valuable tool for anticipating any capital or liquidity shortfalls in your business and to ensure that timely action is taken before nearing a regulatory deficit. Forecasting can also help you appraise new business opportunities with the assurance you will be meeting your regulatory requirements. This also applies to your wind down costing if indeed there have been significant changes to staffing or lease or any other supplier contracts that could alter your fixed cost base.  
3. Assessment of harms – establishing a detailed risk matrix which analyses the harms that your firm poses to itself, your clients, and the wider market. Understanding these harms and mapping your controls to them enables you to properly monitor your risk environment and implement improvements and updates where necessary. External factors which are beyond your control could have a substantial impact on your operational resilience, financial performance, and liquidity levels, therefore consideration of macro-economic events helps to create a more robust assessment of harms.

What to expect in 2023?

By 31 March 2023, all firms will have submitted at least one MIF007 (ICARA questionnaire) return to the FCA via RegData; this is likely to trigger the FCA to commence a series of thematic reviews of the RegData submissions, including the underlying documentation on request from a subset of investment firms across the industry. Therefore, all firms should now have a fully functioning ICARA process in place or should be starting the process of implementing one.

We're here to help!

If you haven't yet made a start on your ICARA, we can support you throughout the process.

If you have documented the ICARA and the wind-down plan already, but you're unsure whether it's in line with the rules and guidance, we can assist you with a thorough review and advise accordingly on any gaps that need attention.

Even if you've submitted your MIF007 to the FCA, are you confident that your ICARA documentation and processes align with the key considerations outlined above? 

Please get in touch to speak to an expert and get further clarification or assistance.