The U.K. Financial Conduct Authority has published a report on its review of how firms in the asset management sector selected and used risk modelling and other portfolio management tools. The review was undertaken to assess how firms identify and manage the risks as well as firms' ability to respond to system failures or service interruptions.
The FCA found, among other things, that firms: (i) adopt different approaches in their use of portfolio tools, vendor management and model governance; (ii) experienced delays and challenges when implementing changes in this area; (iii) had not properly considered how they would manage different lengths of outages; and (iv) experienced unexpected operational issues during software updates or testing. The FCA provided feedback to firms involved in the review, setting out its expectations for improvements. The FCA's report reiterates that the FCA expects firms to ensure that their implementation of these tools enables them to comply with the FCA's rules and expectations, including the obligation on a firm to ensure that it can continue to function and meet its regulatory obligation in the event of unforeseen interruption. The FCA intends to continue assessing the operational resilience arrangements at firms, including those not involved in the review.