Understanding Capital Adequacy in Investment Management - v2
1. Visit our website: theinvestmentassociation.org/careers
A new and practical course, delivered in consecutive half-day
sessions covering capital adequacy and decision making,
including the key regulatory requirements for ICAAP,
Stress and Scenario Testing (SST) and Wind Down
Key Learning Objectives:
Session 1
„„ Consider the main elements of an investment manager’s balance sheet and how
these are related to capital
„„ Understand why firms do not “hold” capital, the true nature of capital and why
it is required
„„ Be able to identify the key risks to an investment manager’s balance sheet and
know how to embed capital management into business decisions
Session 2:
„„ Know how to assess each key risk category in the ICAAP and how to choose an
appropriate capital estimation approach
„„ Understand the key principles, approach and drivers of SST and what to include
in the regulatory submission
„„ Understand the key requirements of the wind-down and reverse stress testing
processes
UNDERSTANDING CAPITAL
ADEQUACY IN INVESTMENT
THE
INVESTMENT
ASSOCIATION
MANAGEMENT FIRMS
08 MARCH 2017
2. Visit our website: theinvestmentassociation.org/careers
Understanding Capital
Adequacy in Investment
Management Firms
08 March 2017
Background:
This is a unique course, focussing on capital adequacy for investment managers and based on the Investment
Association’s ICAAP guide.
The Individual Capital Adequacy Assessment Process (ICAAP) and the stress and scenario testing (SST) of a
firm’s capital is an important discipline that most managers and risk specialists in the sector should
understand. The ICAAP and SST reports are the first documents that the Financial Conduct Authority (FCA) will
assess before a Supervisory Review and Evaluation Process (SREP) visit and the quality of these will set the
tone of the questions asked at the meetings. Further, the FCA will expect a firm’s senior management and
board to understand the concepts and results of the ICAAP and the SST and to use them to manage the
business.
The standards expected by the FCA are much higher than in the past and there is a high correlation between
failed firms and the quality of their ICAAP and risk governance framework. Poor understanding of the ICAAP
and SST can, at best, lead to higher additional regulatory capital requirements (at increased cost) and, at
worst, the failure of the firm. In contrast, a good understanding can help to identify the risks to the business
strategy and to optimise the use of capital.
Recognising the importance of the ICAAP, the Investment Association has produced detailed guidance for
member firms and this course expands on this guidance and provides practical measures for its
implementation, based on the extensive experience of the course leader.
Who should attend?
The course is delivered in two parts. The morning session provides an introductory to intermediate level
understanding of capital principles and is suitable for all staff up to senior manager and non-executive
director level. The afternoon provides more technical explanation and guidance at an intermediate to advanced
level, for those who will be more directly involved in the development of a firm’s ICAAP, SST and wind-down.
The programme should be of interest to both investment management firms and those providing services to
such firms, in particular consultants, accountants and legal firms. It will appeal in particular to those engaged
in Executive Management, Business Development, Investment Management, Institutional Relationship
Management, Investment Operations and Administration, Finance, Risk, Compliance and Legal. It will also be
relevant for specialists from organisations that support or provide services to investment management firms,
such as Third Party Administrators, Consultants, Professional Services Advisers and Regulators.
Lead trainer:
Ian Davies has 34 years of financial services experience and specialises in risk management for investment
managers at both fund board and corporate levels. Ian chairs the Investment Association’s Risk & Regulation
Committee and he is a non-executive director of ARKUS, which provides risk analytics, reporting and
governance services to investment management managers in the UK and Luxembourg.
Ian is one of the UK’s leading experts on risk governance, capital and stress testing for asset managers,
having developed and implemented ICAAPs for JPMorgan Asset Management, Schroders and Aviva Investors.
In addition, he has managed the process for two successful regulatory SREP visits by the FCA, resulting in
improved capital guidance in both cases.
In-house training option:
All advertised IA traning programmes are available to be delivered in-house. Bespoke tailored training can help
you achieve your organisation’s development objectives, which we at the IA and our training partners are happy
to assist you with. For more detailed information should you have any in-house requiremnts, please contact
Ryan White, Training and Development Manager via email: ryan.white@theia.org or telephone: 020 7269 4601.
3. Visit our website: theinvestmentassociation.org/careers
Understanding Capital
Adequacy in Investment
Management Firms
08 March 2017
Session One
09:00 Welcome - Background and session objectives
Introduction:
„„ A look at a typical investment manager’s
balance sheet
„„ Assets and liabilities
„„ Economic capital, regulatory capital, surplus
capital
„„ Capital resources vs. capital requirements
Capital requirements:
„„ Pillar 1
„„ Pillar 2 (ICAAP)
„„ Wind-down
„„ Individual capital guidance (ICG)
Case study: A case study will be used to
illustrate the effects of changing key
parameters on the balance sheet and the
capital requirements.
Stress and scenario testing – guest speaker
A representative from a member firm, or
an audit and assurance firm, will speak about
their experience of applying stress and
scenario testing to business plans.
11:00 Morning coffee break
11.15 How to assess the capital implications of the
business strategy and new business initiatives
„„ Pillar 1 capital drivers
„„ Pillar 2 capital drivers
„„ Wind-down capital drivers
„„ Stressed and unstressed impact on capital
projections
„„ Capital assessment template
Case study: The case study will be developed
to show how business changes can impact the
capital position.
13:00 Lunch
Session Two
13.30 Welcome - Background and session objectives
ICAAP
„„ Risk identification
„„ Risk appetite
„„ Quantitative risk assessment, including:
- Operational risk
- Market risk
- Credit risk
- Interest rate risk
- Pension obligation risk
„„ Pillar 1-plus vs. bottom-up approach and the
FCA’s guidance
Case study: A worked ICAAP example will be
developed to illustrate the key concepts.
Capital stress and scenario testing
„„ Identifying risk drivers
„„ Defining stress scenarios
„„ Building the capital stress testing model –
practical considerations
„„ Preparing the regulatory stress and scenario
testing report – key points to include
Case study: An example stressed capital plan
will be used to illustrate the key concepts.
15:30 Afternoon tea
15.45 Wind-down analysis and reverse stress testing
„„ Wind-down and reverse stress testing scenarios
„„ Impact and risk assessment
„„ Financial plan
„„ Operational wind-down plan
„„ Communications plans
Case study: An example wind-down plan will be
used to illustrate the key points.
ICAAP format and content
„„ Meeting stakeholder requirements
„„ What to include in the ICAAP
17:30 Course conclusion
4. Visit our website: theinvestmentassociation.org/careers
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Contact us by: Phone: +44 (0)20 7269 4601 Email: Training@theia.org
Post: The Investment Association, Camomile Court, 23 Camomile Street, London EC3A 7LL
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COURSE FEES
(see our terms and conditions below)
ARE YOU AN INVESTMENT ASSOCIATION MEMBER? YES NO
WHICH SESSION WOULD YOU LIKE TO ATTEND? AM PM BOTH
IA MEMBERS RATE = £375.00 + VAT PER SESSION OR £650.00 + VAT FOR BOTH SESSIONS.
NON-MEMBER RATE = £450.00 + VAT PER SESSION, OR £780.00 + VAT FOR BOTH SESSIONS.
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TERMS AND CONDITIONS
Payment for the course must be made in full before the course commencement date.
Any cancellation must be made in writing. For all cancellation received 15-30 days prior to the course start date, 50% of the
course fee is still payable. No refund is given for a cancellation made 14 days or less prior to the commencement of a course.
Transferring from one course to another is treated as a cancellation.
You can substitute one delegate for another at no additional cost. In this instance, please give two business days’ notice.
DATA PROTECTION:
The Investment Association will use the data you provide to process your registration. We would also like to use the data to
keep you informed (by post, telephone or email) of other Investment Association training courses, products and services.
If you do not want us to do so, please tick this box:
OTHER IA TRAINING COURSE TOPICS INCLUDE:
„„ INVESTMENT RISK (HALF-DAY)
„„ INSTITUTIONAL INVESTMENT MANAGEMENT - WHAT MAKES THE BUSINESS TICK?
„„ UNDERSTANDING CAPITAL ADEQUACY IN INVESTMENT MANAGEMENT
„„ UNDERSTANDING REGULATION AND COMPLIANCE IN INVESTMENT MANAGEMENT FIRMS
„„ UNDERSTANDING THE USE OF DERIVATIVES WITHIN INVESTMENT MANAGEMENT FIRSM
„„ UNDERSTANDING AND MANAGING RISK IN INVESTMENT MANAGATEMENT FIRM
„„ CLIENT ASSETS AND CLIENT MONEY (CASS)
„„ AN INTRODUCTION TO DERIVATIVES (HALF-DAY)
„„ UNDERSTANDING THE BUSINESS OF RETAIL INVESTMENT FUND MANAGEMENT COMPANIES
„„ FINANCIAL MARKETYS AND THE BUSINESS OF ASSET MANAGEMENT
FOR ADDITIONAL PROGRAMME INFORMATION, PLEASE VISIT THE IA WEBSITE OR CALL: 020 7269 4601
