+186. Following the above assessment, competent authorities should form a view on the investment …

186. Following the above assessment, competent authorities should form a view on the investment …

Following the above assessment, competent authorities should form a view on the investment firm’s Risk-to-Client. This view should be reflected in a summary of findings, accompanied by a risk score based on the considerations specified in Table 5. If, based on the materiality of certain risk factors, competent authorities decide to assess and score them individually, the guidance provided in this table should be applied, as far as possible, by analogy.

Table 5. Supervisory considerations for assigning a risk score for Risk-to-Client

Risk Supervisory view scoreConsiderations in relation to Considerations in relation to adequate management and inherent risk controls
•The nature and composition of • There is consistency risk exposure implies between the investment
There is a low risk of significant prudential • impact on the 1 investment firm considering the level • of inherent risk and the controls. management and •nonmaterial risk/very low risk. firm’s management and Exposure to complex products controls and its overall and transactions is not strategy and risk appetite. material/very low. • The organisational The level of concentration risk is framework is robust with not material/very low. clear responsibilities and a The processes level and of risk systems related is not to clear between separation risk takers of tasks and material/very low. management and control functions. The nature and composition of • Measurement, monitoring risk exposure implies low to and reporting systems are
There is a medium-medium risk. appropriate.
low risk of significant prudential impact on 2 the investment firm considering the level of inherent risk and the management and controls.Exposure to complex products and transactions is low to medium. The level of concentration risk is low to medium. The level of risk related to processes and systems is low to medium. The nature and composition of • There is a deficiency in the risk exposure implies medium to investment firm’s
There is a medium-high risk of significant prudential impact on 3 the investment firm considering the level of inherent risk and the controls. management andhigh risk. management and controls Exposure to complex products compared to its overall and transactions is medium to strategy and risk appetite. high. • The organisational The level of concentration risk is framework lacks clear medium to high. responsibilities and a clear The processes level of and risk systems related to is separation between risk of takers tasks and medium to high.
There is a high risk of • significant prudential impact on the • 4 investment firm considering the level • of inherent risk and the controls. management and •The nature and composition of management and control risk exposure implies high risk. functions. Exposure to complex products • Measurement, monitoring and transactions is high. and reporting systems are The level of concentration risk is not sufficient or consistent high. enough, some risks are The processes level and of systems risk related is high. to not reported. properly monitored or

1. Overview

,

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
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