Blog

Author - Lorraine Mouat, Head of Payment Services 

Background

On the 10th March, 2023, the FCA summarised its findings and set out its expectations of FCA solo-regulated fast growing firms to identify, assess and manage the risks arising from their activities. 
The FCA’s review of 25 firms that had experienced rapid growth over a three-year period, focused on risk management practices, governance arrangements, and adequacy of financial resources (capital and liquid assets) at firms across three financial services sectors, including payment services firms.

The findings are not altogether surprising. Whilst risk management practices and governance arrangements may have been appropriate at the time of authorisation, the FCA found that these have not kept pace with the growth of payment services firms’ business activities, resulting in an increased risk of poor outcomes for consumers.

In addition, firms’ assessment of the adequacy of financial resources failed to consider the growth in their underlying business; therefore financial resources were not proportionate to the firms’ size, business model, and underlying risks, placing these firms at greater risk of a disorderly failure. This position is exacerbated by out of date wind-down planning, increasing the risk of harm in the event of firm failure.

What do you need to do?

When was the last time your firm reviewed its wind-down plan, or considered the inherent risks it may face due to changes in your business model or scale of business undertaken?  Many firms fail to recognise that a wind-down plan, risk management and governance arrangements need to be reviewed and revised regularly, and particularly during times of rapid growth. 

For some firms, creating a wind-down plan or risk management framework is like making a New Year’s resolution: you have good intentions on the 1st of January, then forget all about it by January 2nd. 

The FCA has made its message pretty clear; payment services firms should act now to prioritise updating their risk management practices, governance arrangements and wind-down plans. 

Keeping on top of this is crucial for payment services firms to maintain compliance and avoid costly penalties. It also helps firms to build a positive reputation in the market, increase customer trust, and ultimately, achieve long-term success.

How can we help you?

Thistle Initiatives can assist payment services firms in ensuring that their risk management practices, governance arrangements, and financial resources adequacy assessments are up to date and proportionate by providing regulatory compliance advice and support. We can conduct risk assessments, review governance arrangements, and provide training and guidance to help firms meet their regulatory obligations. Additionally, Thistle Initiatives can provide ongoing support to help firms adapt and stay compliant as regulations and industry best practices evolve.

Are you looking for help with your risk management practices, governance arrangements, and financial resources adequacy assessments or more general regulatory questions? Contact our specialist team now to schedule a free consultation.  Get in touch with us by calling 0207 436 0630 or sending an email to info@thistleinitiatives.co.uk.