Achieving Financial Resiliency in 2023: What Regulated Companies Need to Know

The Financial Conduct Authority (FCA) has announced that it will require 20,000 regulated companies to report on their financial resilience as part of its plan to minimize harm to customers. This new regulatory return is set to be introduced in the next year, giving firms time to prepare. For GRC professionals, this announcement highlights the importance of achieving financial resiliency. In this blog post, we will explore what it means to be financially resilient, what the FCA’s new measures entail, and how your organization can achieve financial resiliency in 2023.

What is Financial Resiliency?

Financial resiliency refers to a company’s ability to withstand financial shocks and risks, as well as recover from them. This can include risks such as economic downturns, market volatility, cyberattacks, and other unexpected events. Financially resilient companies are able to adapt to changing circumstances and mitigate any negative impact on both their business and customers. Achieving financial resiliency is a key aspect of managing risk, ensuring business continuity, and protecting customers.

What are the FCA’s New Measures?

The FCA’s new regulatory return will require solo-regulated financial services firms to report basic information about their financial resilience. This includes the company’s assets and liabilities, capital adequacy, liquidity, and risk management practices. The FCA will be using this information to identify firms at risk of failure and enable them to rectify their weaknesses if possible. The ultimate goal is to ensure firms can wind down or enter insolvency in a way that minimizes harm to consumers and the wider market.

How Can Your Organization Achieve Financial Resiliency?

Achieving financial resiliency requires a proactive approach to risk management. It involves identifying potential risks and taking steps to mitigate those risks. Here are some key strategies that can help your organization achieve financial resiliency:

  1. Develop a risk management framework: A risk management framework should be established to identify potential risks and assess their impact on the organization. This framework should be updated regularly to reflect changes in the business environment.
  2. Invest in data analytics: Data analytics can provide valuable insights into financial risks and help organizations identify potential issues before they become major problems.
  3. Enhance liquidity management: Organizations should ensure that they have sufficient liquidity to withstand unexpected events. This can include maintaining adequate cash reserves and establishing lines of credit.
  4. Focus on cybersecurity: Cybersecurity threats can cause significant financial harm to organizations. It is essential to have robust cybersecurity measures in place to protect against attacks.
  5. Educate employees: Employees should be trained on the importance of financial resiliency and their role in achieving it. This can include training on risk management, cybersecurity, and other relevant areas.

In light of the FCA’s new measures, achieving financial resiliency has never been more important for regulated companies. By developing a risk management framework, investing in data analytics, enhancing liquidity management, focusing on cybersecurity, and educating employees, organizations can boost their financial resilience and minimize harm to customers. By taking these steps, your organization will not only be compliant with the FCA’s new regulatory requirements, but also better positioned to weather future financial shocks and risks.

Are you looking for a solution to help your team achieve financial resiliency? Check out Connected Risk for more information!

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