Hitting the target - ARROW II

The FSA has recently replaced “The Firm Risk Assessment Framework” from February 2003 with its ‘ARROW II’ model. Mazhar Manzoor of FSA Compliance Consultants Ltd takes a practical look at what has changed and some of the drivers behind the new approach.

© FSA Compliance Consultants Ltd 2006. Mazhar Manzoor is Managing consultant of FSA Compliance Consultants Ltd and can be contacted on 0845 4507222 or enquiries@fs-a.com

What is ARROW?

ARROW (Advanced, Risk-Responsive Operating FrameWork) provides the link between FSA statutory objectives (maintaining confidence in the financial system, promoting public understanding of the financial system, securing appropriate protection for consumers and combating financial crime) and regulatory activities, and is designed to: identify the main risks to FSA objectives as they arise; measure the importance of those risks; mitigate those risks where their size justifies this; and monitor and report on the FSA risk management progress. The approach, which became a necessity following the multiplication in the number of regulated firms with the introduction of mortgage and general insurance regulation, has received favourable reviews in the Arculus Report from the Better Regulation Task Force and the Hampton Report on Regulation. Many aspects of ARROW and the single regulator model itself are increasingly being adopted in other international jurisdictions.