Under the FCA supervision pillars, what is meant by 'Proactive' supervision?

'Proactive' supervision under the FCA (Financial Conduct Authority) framework refers to the continuous assessment of firm conduct risk. This approach emphasizes the importance of ongoing evaluations and monitoring of firms to ensure they are operating within regulatory guidelines and maintaining appropriate standards of conduct.

In a proactive supervisory model, the FCA actively engages with firms on a regular basis, analyzing their procedures, practices, and behavior rather than only responding to incidents or issues after they have occurred. This forward-looking perspective helps prevent potential misconduct or breaches of regulations before they escalate into more significant problems.

By focusing on continuous assessment, the FCA can identify trends, emerging risks, and areas of concern early on, allowing for timely interventions and support to enhance compliance and protect consumers. This ultimately promotes a more stable and transparent financial market, fostering a culture of accountability among firms.

In contrast, other options like event-driven monitoring and reactive responses to crises pertain to responding only when issues arise, which is not indicative of a proactive approach. Annual audits by external regulators, while important, do not provide the ongoing oversight needed to effectively manage conduct risk throughout the year.