On 13 January 2020, the FCA published a new webpage setting out its findings on how asset management firms select and use risk modelling and other portfolio management tools.
The basis for the review was to identify and manage relevant risks in the industry and assess how asset management firms utilised the tools and models at their disposal to respond to system failures or service interruptions. The FCA found that the sample of firms tested used various approaches in the use of portfolio tools. Some firms relied on a single provider offering an integrated package, whereas others used a suite of tools from different providers or built their technology in-house. The report examines the advantages and disadvantages of these differing approaches.
In general, the FCA observed good practice at most firms, although the review identified problems in firms’ processes and controls, particularly in risk model oversight and contingency planning. The report sets out its findings in further detail under the following headlines:
- vendor management;
- model governance;
- managing change;
- resilience and recovery;
- testing of software; and
- customer expectations.
In terms of next steps, the FCA will continue to review the operational resilience arrangements in place at firms, including those which were not included in the review.
