Building our understanding of risk

Embedding risk-based choices in our work is one of the three strategic priorities we set ourselves to achieve by 2023. 2020 was about driving this work forward so we capture and monitor risk more effectively.

Regulators around the world are using risk to prioritise their work and to demonstrate their effectiveness. We are no exception.

Having successfully developed and launched a new risk model in 2019, we continue to progress our approach to risk-based supervision. This tool informs how we allocate our finite supervisory resources to supervise the Island’s financial services industry.

Honing our risk model

Throughout 2020, we continued to develop the sophistication of our risk model, building on its initial functionality. By the end of the year, our supervisors had used the model to complete almost 800 individual risk assessments on businesses, negative and positive, cementing its place as a key tool for building our understanding of risk.

Thanks to supervisors now having wider access to the model from all areas of our supervisory case management system, they can input greater and richer data. This is producing not only a more detailed picture of the risks our regulated businesses present, but also of the success level of their remediation plans to reduce risk. On a wider note, the data we have so far captured in our risk assessments can be aggregated to build our understanding of risk across Industry sectors. All this data will be critical for telling a positive story internationally about Jersey’s finance industry and how effectively we are supervising it.

In the latter half of 2020, we started the next phase of work on the model to introduce automated and data-led risk assessments. This will help us identify risks that we may not previously have done.

Using data to fight financial crime

A focus for our work on understanding risk has been how we assess financial crime risk, in particular the need for us to develop a model that produces results that will pass scrutiny by MONEYVAL.

Since its publication in September 2020, we have used the National Risk Assessment’s island-wide view of financial crime risk to help refine our own assessment of risk, using the data captured in our model. The results are comparable, indicating that our methodologies are on track.

In 2020, we continued to collect supervisory risk data from Industry, as we did for the two previous years. 2019’s data is already being used by our supervisors to determine and tailor their oversight activities.