Pillar 3 Disclosure

 

Overview

The European Union Capital Requirements Directive introduced standards in the EU for capital adequacy based on the assessment of risk, together with an associated supervisory framework and disclosure requirements. The Capital Requirements Directive is implemented in the UK through rules and guidance enforced by the Financial Conduct Authority (“FCA”).

 

Scope & Basis of Disclosures

This 3 pillar disclosure made in accordance with the UK Financial Conduct Authority ("FCA") Prudential Sourcebook for Banks, Building Societies and Investment firms ("BIPRU") which is required to be made on an annual basis. The disclosures are subject to external verification only to

the extent that they have
been drawn from the Firm's Financial Statements for the year ended 31st December 2017. This document is intended to provide adequate public disclosure of the approach undertaken by Evolution Wealth to manage risk and capital adequacy.

 

The FCA’s rules provide that we may omit one or more of the required disclosures if we believe that the information is immaterial. As this document has been produced solely for the purposes of providing information on the capital adequacy and risk management of Evolution Wealth, any disclosure requirements which do not apply have not been included.

 

Capital Requirements Directive
The Capital Requirements Directive consists of three 'Pillars':

  • Pillar 1 establishes minimum capital requirements in respect of credit, market and operational risk exposures using standard criteria.
  • Pillar 2 requires firms to assess the risk exposures specific to their business and to calculate the amount of capital that should be held against these exposures.
  • Pillar 3 requires firms to publicly disclose their policies for managing risk and their capital requirements. This is designed to promote market discipline by providing market participants with key information on a firm’s risk exposures and risk management processes.

 

Risk Management

Risk Appetite

Evolution Wealth recognises that risk taking is an essential part of doing business and therefore does not necessarily need to be, and cannot always be eliminated. Risks must be fully understood and adequately measured to ensure that the business’ risk exposure is appropriate, and is consistent with our strategic objectives and consumer outcomes. The Board of directors is responsible for setting out Evolution Wealth’s risk appetite and this is reviewed at least annually to ensure that they remain appropriate to Evolution Wealth’s risk profile and strategic objectives.

We will at all times aim to maintain enough capital to exceed minimum capital adequacy requirements, as the business is managed with an aim to mitigate risk exposure for the business. 

As part of the commitment to treat our customers fairly and manage the company with appropriate due diligence and effective governance, an ongoing consideration of the risks affecting the business is undertaken. The purpose is to identify the potential factors that could impact on the ability to treat consumers fairly, provide adequate protections for clients and promote reassurance for transacting business. In addition, there is an underlying need to safeguard the interests of the company and uphold the principles for business, financial crime prevention and confidence in the financial services sector.

 

Risk Management

In addition to regular reviews, Evolution Wealth has a number of procedures in  place to evaluate and manage potential risks to the company including (but not limited to) business continuity, data security measures, stress- testing   procedures, contingency funding for capital adequacy and the group business plan.

In addition, Evolution Wealth utilises a Business Risk Committee that monitors, assigns ownership, mitigates risk and reports to the Board of Directors. This is a key tool in the overall identification, measurement and mitigation of risk. There are variously appointed sub-committees that are assigned their own specific risk areas to monitor and mitigate. The sub- committees then report into the Business Risk Committee for overall visibility, monitoring and raising to Board of Directors.

 

ICAAP Adequacy & Reviews

Evolution Wealth gives the highest priority to ensuring the continual delivery of services to our clients during challenging periods. Business Continuity is seen as the activities that maintain and recover business operational effectiveness against any untoward or adverse circumstances.

Threats to the survival and growth of the business can come in many different forms and the purpose of this document is to set out an understanding of those threats and the prescribed responses to them. The risks themselves are identified in the risk summary section. Each threat is evaluated by means of a Risk Assessment.

The scale of each perceived potential impact on the business has been considered, taking parameters such as the likely degree and duration of the disruption and the potential    financial consequences. The goal is for all services to continue normally for the duration of any disruption.

The key business processes and their respective objectives are listed within this document. These procedures are designed to specify what internal actions are needed for the business to be able to provide services in response to any given threat materialising. The relevant Disaster Recovery Action Plans and Procedures within this document detail how Evolution Wealth will respond in the event of so- called “disasters”, while the wider Business Continuity Plan sets out how the network seeks to avoid or mitigate against the impact of such potential events.

Both the individual disaster recovery plans and the business continuity approach depend centrally on key people and effective communication to restore normal services.

If services fall below pre- defined levels for more than a pre-defined    minimum acceptable duration, this constitutes what is commonly referred to as a crisis or disaster – this plan adopts the

use of the word incident to reflect the differing levels of seriousness of these events. Disaster recovery is taken to mean those activities recovering IT and other infrastructure    from interruptions. In this plan, an interruption to services is deemed to be anything which degrades or disrupts those activities and the facilities necessary to maintain delivery of Group services.

Evolution Wealth aim is to plan to avoid altogether, or mitigate potential threats to the extent that it is deemed reasonable, practical and commercially viable, which is borne out of a duty of care to both consumers and staff alike.

Where threats materialise into inconveniences, interruptions or full scale incidents, this plan sets out the steps needed to be taken by the Group’s management to recover / resume normal services. The relevant business continuity procedures contained within this plan will be invoked by the Compliance Director and managed by that individual through the recovery process.

 

Risk Area

Approach to Risk

Credit Risk (None)

No risk exists as no debt based investments are held by the company.

Market Risk

Market risk is applicable to all forms of investment; however the exposure to values decreasing significantly on the basis of changing market conditions has limited potential relative to mainstream investment products or funds. Appropriate diversification is employed to mitigate the possible effects of

market risk.

Liquidity Risk

The business currently has no material liquidity risk, but we do recognise this as a moderate risk to the business which is mitigated through the holding of freely

available assets to cover at least 6 months of total fixed overheads.

Operational Risk

The risk from failed internal controls is again always apparent. The structure of Evolution Wealth is as a service based company with well-defined company procedures and plans, all of which have been subject to external consideration. The company is protected via professional indemnity insurance and undertakes external and independent audits on an annual basis to consider procedural effectiveness. Additionally, the business maintains engrained levels and routes

of escalation where issues are identified.

Insurance Risk

The Firm maintains Professional Indemnity insurance and Office Insurance for the benefit of the firm. The policies, which are in market standard terms, cover the most likely sources of loss to the Firm to a level that is proportionate to the scale of the Firm’s business. The policies are underwritten by insurers with satisfactory credit ratings. In the event that any of these policies do not pay out as soon as anticipated, the Firm’s existing regulatory capital resource requirement (which is based on its Fixed Overhead Costs) and its access to additional capital from its members mean that the Firm is in a position to continue to operate. In the event that a particular loss falls outside the terms of its insurance, the Firm’s management will, where appropriate, make provision in the ordinary course of business for such potential losses as soon as is prudent. Having considered the policy excesses, no additional capital has been allocated under the ICAAP to cover an exposure the Firm may face outside the fixed overhead costs taken into

account in its regulatory capital resource requirement.

Concentration Risk

Not applicable as the firm does not have any exposure to third party debtors or

counterparties.

Residual Risk

Naturally   residual    risk    remains    despite    planning   undertaken.                    Whilst independent in its own right, Evolution Wealth is benefitted by the close

association to Aspect8, Creative Technologies, Best Practice  and Fusion  Wealth.

 

Details of the material risks listed in the FCA General Prudential Sourcebookand the firms’ tolerance level towards them are detailed below. 

 

Remuneration Policy

Policies

Benchmark Capital Limited has identified those employees who are deemed to be Code Staff with reference to their managerial and influence on the company’s overall risk profile of the FCA regulated business.

These comprise of:

  1. Directors and senior managers
  2.  Other Code staff with control functions as deemed appropriate

Our remuneration policy is reviewed by the Board of Evolution Wealth Network Limited.

Evolution Wealth Network operates a competitive remuneration structure relative to employees’ role and seniority. Evolution Wealth has a bonus scheme in place and is based on the company’s financial performance and individual achievements. The aim of the scheme is to provide fair, competitive pay that rewards firm and employee performance and to create a culture of ownership where employees are rewarded for their contributions. Excessive risk taking is not rewarded. Bonuses are limited to 20% of basic annual salary.

The aggregate annual quantitative information on remuneration of our Code Staff, of which we have 5 employees and Directors as at 31 December 2017. These employees and Directors are remunerated by other companies within Evolution’s group under a dual employment contract and no costs are borne by Evolution.

Senior Management       £0

Other Code Staff      £0

 

This is comprised of non-deferred fixed salary, non-contributory pension and benefits in kind. There were no payments of variable pay or share plan related remuneration.

 

Capital Requirements

Tier 1 Capital

Share Capital

1,000

Retained earnings and other reserves

404,154

 

405,154

 

Deductions for Tier 1

Intangible Assets

-

 

405,154

 

Tier 2

Revaluation Reserve

-

 

405,154

 

 

Tier 1 and Tier 2 Capital

T1 & T2 Capital

 

405,154

Less the higher of the following:

 

 

-     Base Capital

50,000

 

-     Credit, market and counterparty

risk requirements

142,000

 

-     Fixed Overhead Requirement (FOR)

11,000

 

 

 

(50,000)

Pillar 1 Surplus

 

355,154

Pillar 2 Requirements

 

(142,000)

Surplus Capital

 

213,154

(Regulatory Capital Ratio 211%)

Evolution Wealth Network

Sussex House
North Street
Horsham
RH12 1RQ

Email: info@evowealth.co.uk

Tel: 01403 334499