The FSA small firm review is underway – are you ready?
- Affects all firms which advise, or have permission to advise - except for the very largest brokerages
- The FSA has confirmed the review will include sole traders
- Focus is on the governance of your firm, your culture and your controls and, specifically, “how you identify and take steps to prevent the potential risks within your businesses”
- Three stage process. Stage one - workshops; stage two - individual firm review; stage three - follow up action
- Stage two (individual firm review) already underway in North West and West Country; invitations to workshops in West Midlands issued - workshops are scheduled for July
To see the first of our guides designed to help firms prepare for their review
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If you think you may need help to prepare for your FSA review call ICS on 01892 539600 or email enquiries@insurancecompliance.co.uk. We're already assisting firms in the North West and West Country, so we have a good understanding of the key issues. If you have concerns talk to us sooner rather than later - our experience can help your business.
Latest update on FSA review
Stage one - workshops
Stage two - individual firm review
Stage three - follow up work
Region by region
How to prepare
The FSA website has details of the plans and thinking behind this review (click here) but, in summary, the current situation is as follows:
Stage one - workshops
The review begins with an invitation to one of the FSA's Business Risk Awareness Workshops (BRAWs). The workshops are intended to help firms think about the governance, culture and controls in their business and to look at the various risks which their business might face, including both external and prudential risks. The workshops include case studies for firms to work through and discuss.
In ICS's view there would have to be a good reason for a firm to choose not to go to a workshop where invited. To quote the FSA's website: "The workshops will apply to all firms. If you receive an invitation it is because you will be part of our review programme, so we recommend that you attend." If you think you should have received an invitation but have not, or you've mislaid the invitation, the FSA's website suggests you contact eventsbooking@fsa.gov.uk. The FSA is quite clear that its review process will cover all smaller firms so if you fall into the scope of the programme, it's probably only prudent to make sure you attend.
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Stage two - individual firm review
This can take a number of forms:
Face to face interview
Telephone interview
Or an online or paper-based assessment
The FSA is not requesting any information prior to the interviews or assessments and - as we understand it - firms are not being asked to bring with them any material. However, the FSA has said it will be doing its own background work including a review of RMARs and other FSA records and, where applicable, reviews of firm websites, Companies House information, etc.
Given that both your invitation to the workshop and any background work on the firm will depend on the accuracy of the information which the FSA holds, ICS's advice is to make sure your profile is accurate and up to date.
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Stage three - follow up work
Follow up work falls into two categories - the FSA will, at random, be verifying the information provided by firms. Informally the FSA has said about 1 in 10 firms will be subject to verification in this way. The FSA has also said that this verification work "gives us the opportunity to check that the information
received during the reviews is a true reflection of what happens within
your firm". Clearly there are likely to be consequences if the verification process shows up significant anomalies, although what these might be is unclear at this stage.
The second aspect of the FSA's follow up work will be supervisory activity; such activity is only likely where the FSA believes there are significant risks within your firm. Among other things, it could involve the FSA reviewing customer files, processes, complaints handling, training and competence and your management.
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Region by region
The FSA is rolling out its risk awareness programme region by region, starting with the North West.
North West - invitations went out in November last year and the first individual firm reviews started in February. NB The FSA has advised there were issues with the mailing lists used for the North West such that a number of firms, which should have been included, failed to receive invitations. The FSA has confirmed such firms will not be included in the review at this stage but is already looking at a ‘workable solution’ to cover firms missed in the first pass. So the fact you may not have received an invitation does not necessarily mean you have avoided the review; we will update this page once we know what arrangements the FSA is proposing.
West Country – workshops took place in March for firms in the following postcodes: BA, BH, BS, DT, EX, PL, SN, SP, TA, TQ and TR and the individual face to face firm reviews are now underway.
West Midlands – invitations to the workshops have been sent by the FSA and the workshops themselves are planned for July.
Other areas - currently (May) we don't have any further information on the schedule for the rest of the country but we will add details of areas and dates as we know them, so it worth checking this page from time to time. To date you won't find the BRAWs schedule on the FSA website.
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How to prepare
The FSA will be focusing on what it considers to be the 'cornerstones' of good business
practice: governance, culture and robust controls.
It is likely that the regulator will be expecting firms to have an understanding of the importance of good governance and what this means in practice. The FSA is also looking for firms to have an appropriate culture and to be using robust controls supported by reliable, relevant management information through which performance of the business is monitored. Finally it will expect firms to understand, and be actively addressing and monitoring, the risks to their business - with particular emphasis on prudential risks and controls.
If you feel there may be areas where you need help, call us. ICS is already assisting a number of firms in the North West and we are very well able to help prepare your business for its review:
- We'll sit down and talk through the different aspects of the review with you - remember we'll be on your side
- We'll ask (and look at) how things work in practice
- We'll establish where the gaps lie and how these can be closed
Our aim will be that you are confident and well prepared for whatever your review may bring. We have the capability and the capacity to guide you through this exercise and to ensure there are tangible benefits from it for your business. Our senior staff are drawn from the general insurance industry so we really do know the market from the inside out.
To see the first of our guides designed to help firms prepare for their review
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