SYSC 7 Risk Control — Compliance Review Questions

The Financial Conduct Authority (FCA) outlines requirements for risk control within its Systems and Controls (SYSC) section of the FCA Handbook, specifically in SYSC 7. These requirements are designed to ensure that firms have effective risk management systems in place. Here are 30 compliance questions tailored to assess adherence to FCA SYSC 7 and related risk control requirements:

Risk Management Framework and Governance

1. What is the structure of the firm’s risk management framework?
2. How does the firm define and categorize different types of risks (e.g., operational, credit, market, liquidity, compliance, and reputational risks)?
3. Who is responsible for risk management within the organization, and how is this responsibility structured?
4. What role does the board or senior management play in the risk management process?
5. How is the independence of the risk management function ensured?
6. What resources (staffing, technology, information, etc.) are allocated to risk management?

Risk Identification and Assessment

1. How does the firm identify and assess risks?
2. What tools or methodologies does the firm use for risk assessment (e.g., risk matrices, scenario analysis, stress testing)?
3. How are emerging risks identified and assessed?
4. What process is in place for regularly reviewing and updating the risk assessment?

Risk Mitigation and Control

1. What controls are in place to mitigate identified risks?
2. How does the firm ensure that controls are effective and proportionate to the risks?
3. What procedures are in place for updating or changing controls in response to evolving risks?
4. How are breaches of risk limits or controls reported and managed?

Monitoring and Reporting

1. How does the firm monitor risks on an ongoing basis?
2. What reporting mechanisms are in place for risk management (e.g., risk dashboards, reports to senior management/board)?
3. How frequently are risk reports generated and reviewed?
4. What thresholds or triggers are established for escalating risk issues to senior management?

Risk Culture and Communication

1. How does the firm promote a strong risk culture throughout the organization?
2. What training is provided to staff on risk management?
3. How are risk management policies and procedures communicated to relevant staff?
4. How does the firm encourage openness and transparency in reporting risk issues?

Review and Improvement

1. What process is in place for the periodic review of the risk management framework and its effectiveness?
2. How does the firm incorporate lessons learned from past risk events or near misses into its risk management practices?
3. What mechanisms are in place for external review or audit of the risk management framework?

Specific Risk Areas

1. How does the firm manage risks related to outsourcing and third-party service providers?
2. What strategies are in place for managing operational resilience and cyber risk?
3. How does the firm assess and manage conduct risk?
4. What processes are in place for managing liquidity risk and ensuring adequate liquidity buffers?
5. How does the firm approach managing risks associated with new products, services, or business practices?

By systematically addressing these questions, compliance officers can ensure their firm’s risk control measures are comprehensive, effective, and in line with FCA SYSC 7 requirements. This not only helps in maintaining regulatory compliance but also supports the firm in achieving its strategic objectives by effectively managing risk.

Disclaimer: The information provided herein is solely for informational purposes and represents my own personal views. It should not be construed as legal or regulatory advice. For advice specific to your circumstances, please consult a qualified professional. Additionally, the opinions expressed are my own and do not reflect the views of my employer.