A step too far?

Demonstrating to the regulator that you have given some thought to the hazards that face your business is more of a regulatory matter than you may think.

Remember that the Financial Services Authority's approach to regulation is driven by its four core objectives laid down by the Treasury, and these include protection of the public.

What confidence can the regulator (or indeed your clients) have in your business, if you do not have a plan in place to deal with any threats to the existence of the company, or indeed that you have not even carried out an analysis of these risks?

I know a builder who never quite gets around to finishing off all of the jobs around his own house, yet would not dream of doing a less-than-perfect job on his clients' homes.

It is ironic that we are in the risk-transfer and risk-management business, spend time and effort in advising our clients, even providing them with business continuity and disaster recovery plans, yet we are sometimes not very good at minimising our own exposures to risk.

Space limits the depth of reply here, but ponder the following: have you thought about how the business may suffer if you should lose your largest client? However loyal the client may be, he could be taken over, or go out of business.

How confident are you in your contracts of employment to prevent your top account executive taking a book of business, were he to leave your firm? What is your plan, should you receive a telephone call in the small hours of tomorrow morning, telling you that the office is burning down?

Do you make a back-up of all of your computer work and files on a daily basis and store that back-up off site?

Poor preparation to deal with any of the above scenarios - and every business has risks to assess - could potentially put you out of business or put you into a situation where your solvency could be questionable.

Now do you better understand why the FSA would quite like to know that you have identified, assessed and have a plan to deal with these risks?