Case Study: Risk Management Framework, Governance & Controls Remediation

Background A large asset management firm required a comprehensive overhaul of their risk management and governance framework. Key areas of focus included:

• Enhancing risk adequacy and quantification for the Internal Capital Adequacy Assessment Process (ICAAP).

• Embedding Recovery Planning and ICAAP into the overall risk management and governance framework.

• Developing robust governance protocols, including risk indicator monitoring, reporting, and governance policies to ensure the firm is well-equipped to handle emerging stress situations.

Delivery

• Reviewed the Risk and Control Self-Assessment (RCSA) and Risk Management Framework (RMF) to identify material risks.

• Organized risk champion workshops to aid in the determination of material risk assessment.

• Deployed industry-standard models to quantify credit, market, and operational risk for the firm such as the Loss Distribution Approach (LDA) and Merton's model for credit risk).

• Authored market-leading ICAAP, Recovery Planning, ILAAP and Orderly Wind-down Plan Documents

• Reviewed the adequacy of risk appetite and tolerance levels for material risks through back-testing (where relevant).

• Designed and calibrated a recovery indicator framework to ensure the firm invokes recovery plan escalation protocols well before reaching regulatory minima.

Benefits

• Enabled the firm to enhance its RMF with adequate risk appetite and tolerance levels for material risks.

• Determined the firm’s liquidity risk appetite.

• Embedded the recovery indicator framework into day-to-day governance and RMF with robust reporting controls.

• Aided in determining early warning indicators to ensure the firm remains well-capitalized during stress scenarios.

• Enabled the firm to successfully undergo the Supervisory Review and Evaluation Process (SREP).