Financial resilience

Strengthening our financial resilience is one of our core priorities.

Historically we maintained an accounting reserve equal to six months operational costs plus potential litigation costs. 

Given our capital investment requirements, the expansion of our regulatory remit and the increasing complexity of our regulatory landscape, a review has been undertaken to ensure that we maintain an appropriate reserve.

The 2021 review covered a range of aspects, including:

• Our financial performance over the last 10 years.
• How costs are managed.
• The anticipated future operational, capital and litigation expenditure.

The aim of the Financial Resilience Review was to propose a framework within which we would be able to better secure the financial position of the organisation that provided a sound rationale for the level of regulatory fees and any potential increases. This approach should also allow us to mitigate the risk of abrupt changes in fee levels.

From the review we have concluded that a change in policy is required from the accounting reserves to one based on retained liquid assets. This will allow us to continue investing in capital initiatives that drive efficiencies, while still managing our operating costs effectively. Additionally, this will ensure that if a significant adverse event occurs, we would retain the financial ability to continue with business-critical projects and maintain normal operations while appropriate action is taken.

How we propose to reach our liquidity target will be outlined to stakeholders each year in our annual business plan.