Living documents

  

Published: 16th July 2010 by William Webster

If you have read some of the UK regulator's policy then you may well have come across the term "living document". What does it mean?

Living documents are ones that change. They reflect what you do and the way you operate within the regulatory framework. They are up to date and reflect what goes on - even annual reviews may be insufficient.

It's important to ask whether they are embedded in the way you operate. If not you won't benefit from the advantages but you will tempt regulatory displeasure and its consequences.

What's the benefit?

Living documents impose discipline on the risk management process.

They challenge assumptions, test understanding, uncover pitfalls and detail remedial action. Furthermore they tell you who is responsible and that's what everyone wants to know.

If you have been involved in liquidity reporting (ILAA) you will see how it works:

• The board's risk appetite is defined.
• The key drivers of liquidity risk are identified.
• These are subject to stressed conditions.
• Contingency plans are adopted.
• Limits are used to constrain risk taking.
• The firm calculates its buffer requirements.
• There's a board approved document that's updated to reflect material changes.

It's all about confidence.

Done properly you are more likely to survive extreme events. It may also keep regulatory costs in check. Anything else?

Many I've talked to remark on uncovering risks that went unspoken. Have you done that too?