120. When reviewing the risk strategy, risk appetite and risk management framework of an investment …

When reviewing the risk strategy, risk appetite and risk management framework of an investment firm, competent authorities should assess at least whether:

• a. investment firms have a holistic investment firm-wide risk management framework extending across all the organisation, recognising fully the economic substance of all its risk exposures including the risks the investment firm poses to itself, its customers and markets and liquidity risk in particular those which can have a material impact on or deplete the level of own funds available;
• b. the risk management framework encompasses all relevant risks with appropriate consideration of both financial and non-financial risks;
• c. the investment firm when identifying and measuring or assessing risks, not only uses quantitative assessment methodologies (including stress testing), but also qualitative risk assessment tools (including expert judgement and critical analysis);
• d. there is effective risk reporting involving sound internal consideration and communication of risk strategy and relevant risk data, both horizontally across the investment firms and up and down the management chain;
• e. the investment firm’s risk management framework includes policies, procedures, risk limits and risk controls ensuring adequate, timely and continuous identification, measurement or assessment, monitoring, management, mitigation and reporting of the risks at the business line, at the investment firm level and, where relevant, at consolidated level;
• f. the risk strategy and risk appetite translate all material risks into specific risk limits;
• g. the risk strategy and appetite appropriately consider the risk appetite and financial resources of the investment firm and take into account supervisory own funds and liquidity requirements and other supervisory measures and requirements;
• h. the investment firm has established processes for the approval of decisions on which the compliance function or, where relevant, the risk management function, have expressed a negative view.

5.6.2 Framework for Internal capital adequacy assessment process and internal risk-assessment process (ICARAP)

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/