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Info: Key Risks to Consider for ICAAP

Which key risks should a firm consider when reviewing their ICAAP?

The below outlines what some of the key risks that should be considered and assessed within a Firm’s ICAAP.

ICAAP Key Risks to consider for ICAAP

The objective of Pillar 2 is to require Firms to consider risks which are either not captured at all, or not captured fully, by Pillar 1.

Pillar 1 focuses upon credit risk, market risk and operational risk, and whilst these should be considered within a Firm’s ICAAP, all other risks to which the Firm is subject to (and the extent that they may affect the Firm’s business model and strategy) should also be examined.

Thus, some key risks that may be applicable to your Firm and thus require consideration within your ICAAP might include:

For each risk that is considered within the ICAAP, an explanation of how the risk has been assessed and the quantitative results of that assessment should be documented.

Where relevant, (e.g. Operational Risk), a comparison of the assessment to that of the results of CRR Pillar 1 calculations should be detailed.

If the firm’s risk appetite varies between risk categories, then this should be clearly articulated.

In addition, and where relevant, if any other method apart from capital is used to mitigate a particular risk then this should also be explained.

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