FSA warns companies of heavy risks

News Article - 30 January 2008
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The Financial Services Authority (FSA) has published its predictions of the risks that businesses face this year, in the wake of a "less benign" economy.

According to its Financial Risk Outlook (FRO), firms need to be aware that tighter economic conditions could increase the level of financial crime or possibly divert business plans away from tackling it.

It also warned that the traditional business models of financial institutions may have to change in the current market or consumer confidence in them could be lost.

Although the FSA states that these are not "firm predictions", chairman Callum McCarthy commented that in order to become stronger businesses, companies need to be aware of both the short and long-term risks and implications.

He said: "Firms are clearly more aware of these risks now and should continue to consider how they would respond to a crystallisation of these risks particularly those relating to capital and liquidity."

The FRO also warned that a number of firms may have to shift focus away from the traditional conduct of business to maintaining day-to-day business processes.

PricewaterhouseCoopers' insolvency department examined figures following 2001-02's economic downturn and predicted a five per cent to ten per cent rise in department activity this year.

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