MIFIDPRU 7.2A Risk management function

MIFIDPRU 7.2A.2R and MIFIDPRU 7.2A.3R apply to a non-SNI MIFIDPRU investment firm that has a risk management function in accordance with SYSC 7.1.2-AR, SYSC 7.1.3R, SYSC 7.1.5R, SYSC 7.1.6R and SYSC 7.1.7R.

1. (1)

   A firm must ensure that its risk management function is independent from its operational functions and has sufficient authority, stature, resources and access to the management body.

2. (2)

   The risk management function in (1) must ensure that all material risks are identified, measured and properly reported. It must be actively involved in elaborating the firm’s risk strategy and in all material risk management decisions, and it must be able to deliver a complete view of the whole range of risks of the firm.

3. (3)

   A firm in (1) must ensure that its risk management function is able to report directly to the management body in its supervisory function, independent from senior management, and that it can raise concerns and warn the management body, where appropriate, where specific risk developments affect or may affect the firm, without prejudice to the responsibilities of the management body in its supervisory and/or managerial functions.

The head of the risk management function must be an independent senior manager with distinct responsibility for the risk management function. Where the nature, scale and complexity of the activities of the MIFIDPRU investment firm do not justify a specially appointed person, another senior person within the firm may fulfil that function, provided there is no conflict of interest. The head of the risk management function must not be removed without prior approval of the management body and must be able to have direct access to the management body where necessary.