Learn how to implement ICARA & SREP in 2026, through practical examples

ICARA and SREP are central to the prudential framework for Cyprus Investment Firms (CIFs), helping firms connect sound governance and effective risk management with appropriate capital and liquidity planning.

More than a regulatory exercise, they provide a structured way for firms to assess their risk profile, strengthen internal controls and demonstrate that they are prepared to remain resilient under changing business and market conditions.

In this blog post, Evdokia Pitsillidou, Global Chief Risk & Compliance Officer at SALVUS Funds and instructor at the Institute for Professional Excellence, introduces the core areas covered in the online course “Learn how to implement ICARA & SREP in 2026, through practical examples.”

The course provides practical guidance on preparing an ICARA, understanding IFR and IFD capital requirements, and applying the main requirements for risk governance, risk assessment, stress testing, capital planning and SREP.

Key Elements of the ICARA and SREP Framework 

ICARA falls within Pillar II of the prudential framework and is designed to connect a CIF’s risk profile with its risk management systems, capital and liquidity position. It also incorporates the Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP). 

An effective ICARA process includes:

• Identification and assessment of material risks faced by the firm.
• Risk mitigation and internal controls appropriate to those risks.
• Assessment of capital and liquidity adequacy in line with the firm’s risk profile and business plan.
• Board and Senior Management oversight, with ICARA integrated into governance and decision-making.
• Preparation of the ICARA report, documenting the firm’s assessment, controls and capital or liquidity requirements.

The framework also operates alongside SREP, through which the regulator reviews and evaluates the firm’s risks, control environment, ICARA and compliance with minimum prudential standards. This creates an ongoing process of dialogue and challenge between the CIF and CySEC.

As part of this assessment, firms must also understand the IFR and IFD capital framework, including the K-Factors covering Risk to Client (RtC), Risk to Market (RtM) and Risk to Firm (RtF).

Stress Testing and Capital Planning 

Stress testing is a central part of implementing ICARA because it allows firms to assess material risks in a forward-looking manner and understand how adverse circumstances could affect their financial position and capital adequacy. 

The course examines three important methodologies: 

• Sensitivity analysis – assessing the effect of changing a single risk factor.
• Scenario analysis – considering the combined impact of changes in several risk factors.
• Reverse stress testing – identifying scenarios that could make the firm’s business model unviable.

Stress-testing results should then feed into the firm’s capital planning. CIFs are expected to align their strategic plans, the risks arising from those plans and the capital needed to support their future activities. 

The ICARA materials also emphasise the importance of assessing material risks through a Risk Register. Risks are evaluated based on their likelihood and potential impact, first establishing a gross risk profile and then reassessing the position after mitigation measures and controls are applied. 

This allows the firm to determine whether a material risk should be addressed through additional capital, additional controls, or a combination of both. 

What is the “Learn How to Implement ICARA & SREP in 2026, Through Practical Examples” course and what does it include? 

The course is delivered by Evdokia Pitsillidou, Global Chief Risk & Compliance Officer and Partner at SALVUS Funds. It is designed to provide professionals with the knowledge and practical guidance required to prepare an Internal Capital Adequacy Risk Assessment Process (ICARA), apply stress-testing methodologies and understand SREP developments. 

The self-paced course is particularly relevant to professionals working within Cyprus Investment Firms (CIFs), especially Compliance Officers, Brokerage Officers and Dealing on Own Account professionals. It can also be valuable for members of the Board of Directors who are responsible for reviewing and approving the ICARA report.