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Shojin is an FCA-regulated fractional investing platform enabling global investors to build their wealth from UK-based real estate investment opportunities.

Risk Management Disclosure



Firms are required under the Senior Management Arrangements, Systems and Controls (SYSC) manual of the Financial Conduct Authority Handbook to have in place robust governance arrangements and effective procedures which allow it to identify, manage, monitor and report the risks it is or might be exposed to.

Shojin Financial Services (“SFS”) is authorised and regulated by the Financial Conduct Authority and this document sets out how the Firm complies with its obligations to identify, manage and mitigate risks.   


The Capital Requirements Directive (‘CRD’) of the European Union created a regulatory capital framework across Europe governing how much capital financial services firms must retain.  The rules are set out in the CRD:

  • Pillar 1 sets out the minimum capital resource requirement firms are required to maintain to meet credit, market and operational risks  
  • Pillar 2 requires firms to assess firm-specific risks not covered by Pillar 1 and, where necessary, maintain additional capital  
  • Firms are to disclosure information regarding their risk assessment process and capital resources with the aim to encourage market discipline by allowing market participants to assess key information on risk exposure and the risk assessment process.      

2.1 Frequency and location of disclosure

Future disclosures will be issued on an annual basis once they have been reviewed and approved by the Directors. The disclosures are not subject to audit except where they are equivalent to those prepared under accounting requirements for inclusion in the financial statements.  

2.2 Scope of disclosure

The firm’s principle activity of the firm is the provision of arranging investments in relation to property and property developments. The firm is classed an IFPRU125K firm.  


3.1 The Management Body

The Directors are responsible for the firm’s risk management governance structure and how the firm’s risk exposure must be managed in line with the firm’s overall business objectives and within its stated risk appetite. This includes the governance of the process for identifying, evaluating, managing and reporting the significant risks faced by the firm.

The Directors are ultimately responsible for ensuring that the firm maintains sufficient capital and liquidity resources to meet its regulatory capital and liquidity requirements and to support its growth and strategic objectives. Risk management is embedded throughout the business, with the overall risk appetite and risk management strategy approved by the Directors propagated down throughout the business as appropriate.

The firm has reviewed the number of directorships held by Board members and are satisfied that the arrangements are such that the management body is able to commit sufficient time and resources to perform their obligations in the firm.  The number of directorships held is monitored on an ongoing basis.  


The firm’s overall approach to assessing the adequacy of its internal capital is documented in the Internal
Capital Adequacy Assessment Process (“ICAAP”).

The ICAAP process includes an assessment of all material risks faced by the firm and the controls in place to identify, manage and mitigate these risks.  

Where risks can be mitigated by capital, the firm has adopted the CRD requirements for Pillar 1. The Directors consider that the Pillar 1 calculations adequately reflect the risk exposure of the firm and that a Pillar 2 add-on is not required at this point of time.  

Directors review risks and the required capital frequently and will particularly do so when there is a planned change impacting risks and capital or when changes are expected in the business environment potentially impacting the ability to generate income.  

4.1 Capital Resources

An IFPRU125K firm must maintain at all times capital resources equal to or in excess of the base requirement (€125,000). The Pillar 1 capital requirement for an IFPRU firm is the higher of:

  1. Base Capital Requirement OR
  2. Credit Risk plus Market Risk plus Counterparty Risk Capital Requirements OR
  3. Fixed Overhead Requirement   

The firm has no innovative Tier 1 capital instruments or deductions.  

The firm must maintain at all times capital resources equal to or in excess of the Pillar 1 requirement. During the 12-month accounting period to 30th June 2019, the company complied fully with all capital requirements and operated well within regulatory requirements. At the accounting reference date, the firm held the following capital position:    

Description Amount (£ 000’s) Ordinary share capital 180 Retained Earnings 316    Core Tier 1 Capital 496    Total Capital / Own Funds 496 Base Capital Requirement 112 Fixed Overhead Requirement 36 Credit Risk/Market Risk 40    Total Pillar 1 Requirement 40    Surplus capital over minimum requirement 456 Total Risk Exposure Amount (TREA) 500    CET1, Tier1, and Total Capital ratio 99%  

IFPRU Firms are required to have:

  • Common Equity Tier 1 capital of 4.5% of TREA. Our minimum requirement based on the above TREA is £22K and we currently have a Common Equity Tier 1 capital amount of £496K (99% of TREA);  
  • Tier 1 capital of 6% of TREA. Our minimum requirement based on the above TREA is £30K and we currently hold a Tier 1 capital amount of £496K (99% of TREA);  
  • Total capital (Own Funds) of 8% of TREA. Our minimum requirement based on the above TREA is £40K and we currently hold Own Funds of £496K (99% of TREA).  

However, as the base capital requirement of £112K is higher than both the credit risk component and the fixed overhead requirement, the firm are required to hold a minimum £112K regulatory capital. As at 30th June 2019 the firm held £496K. The Directors are therefore comfortable that the firm is, and has been throughout the financial year, adequately capitalised for Pillar 1 purposes. 

The Directors are comfortable this will ensure prudent capitalisation and cover for market downturns and other risks that may materialise in the short to medium term.   The Directors constantly monitor the performance of the firm and capital adequacy is regularly assessed.  The firm will also monitor risks throughout the year and decide if additional capital should be held against them.  Additional risks that supplement the Pillar 1 requirements are detailed below and, where necessary, additional capital will be provided.   


5.1 Risk Profile
SFS has identified the following core risk categories: investment risk, reputational risk, liquidity risk and operational risk.

SFS profile of these risks is continually evolving and is generally driven by:

  • Changes to the market in which we operate;
  • SFS’s strategies and business objectives and;
  • SFS’s business/operating models   

5.2 Risk Appetite

The Directors are responsible for setting the firm’s risk appetite, defining the type and level of risk that the firm is willing to accept in pursuit of its business objectives.  

5.3 Three Lines of Defence 

The firm’s governance structure is designed such that the business is the first line of defence, the compliance function is the second line of defence with the Board of Directors representing the third line of defence.

First line of Defence Business Strategies and goals Firm Values Risk Appetites Identification, control and management of risks.  Operating requirements: roles and responsibilities, supervision, procedures, systems and controls Identifying Risks Faced Identifying Risks Taken Control and Management of Risks Second line of Defence Compliance and independent oversight of business Risk Management Framework Policies and Procedures, Guidance and Training Monitoring Third Line of Defence Board of Directors Governance Full accountability for the management of risks  


The Directors are responsible for approving the risk assessment framework, which is used to ensure that the firm has a comprehensive understanding of its risk profile, including both existing and emerging risks facing the firm, and to enable it to assess the adequacy of its risk management in the context of the firm’s risk appetite.

Principal Risks
Appetite Key Drivers Mitigation

Strategic Risk The risk that arises from decisions that fail to reflect the full business operating environment and the impact of failing to adequately identify changes to the business model. The firm will remain competitive by identifying opportunities and assessing the risks, rewards and costs associated with them before proceeding Regulatory landscape impacting the business Commercial/market conditions Internal business/operating model Due diligence is carried out prior to any new business opportunity and a full assessment of the potential and actual risks taken into account. Appointment of external compliance consultants

Credit Risk Refers to the risk that a borrower or debtor will default on any type of debt owed to the firm by failing to make required payments. The risk also includes lost principal and interest and disruption to cash flows The firm will only engage with reputed third-party firms. As far as individuals are concerned due diligence processes are in place to on-board customers.   Market conditions Third Party credit worthiness The firm uses the standardised method of calculating Credit Risk and ensures capital is held to cover exposures.

Liquidity Risk The risk that the firm does not have sufficient liquid resources or is unable to deploy such resources to meet its actual or potential obligations in a timely manner as they fall due The firm will have sufficient and accessible financial resources as to meet any financial obligations as they fall due Operational risk Credit risk events Internal business operating model Periodic reviews of financial resources Directors have access to contingency funding  arrangements  

Operational Risk The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events The firm will actively identify and manage the risk of its people, processes or systems failing.  Operational risk is inherent in any business however the firm will take steps to prevent such risks from increasing operating costs  Internal business operating model External threats Market conditions Employees provided training and guidance on their obligations Critical technology performance monitored Risk scenario contingency planning Timely escalation and mitigation of identified risks

Legal The risk arising from defective transactions, failing to take appropriate measures to protect assets, changes in law and claims resulting in a liability or loss to the firm. The firm will appoint external legal advisors (as needed). However, the firm does not intend to have any appetite for legal breaches Regulatory regime Legislative framework Staff training and regular monitoring of changes in law and the implications to the firm

Regulatory Capital Risk The potential increase in risk caused by a reduction in the firm’s own funds through expected or realised losses. The firm will have adequate financial resources in place Operational risk Market conditions Liquidity Regular reviews of financial resources and financial position via the ICAAP process.

Financial Crime Risk The risk that the firm fails to prevent its involvement in or use by other parties to commit financial crime The firm has no appetite for any breaches or lapses occurring that result in financial crime taking place External threats Internal controls Financial crime policies and procedures are in place and employee training will be provided.  


SFS’s Remuneration Policy complies with the Remuneration Code in relation to its size, nature, scope and complexity of our activities. The policy is aligned to the firms’ business strategy, objectives, values and long-term interests in respect of performance and effective risk management in line with the firm’s risk appetite.  A copy of the firm’s Remuneration Policy is available and sets out how the firm complies with the Remuneration Code.