The above requirements reflect the different risk profiles of the 3 investment firm categories. Risk-based Capital Requirements vary according to the level of position and other risks undertaken, and the size of the firm (measured in terms of adjusted annual expenditure). For larger firms, or those exposed to relatively higher levels of risk, Risk-based Capital Requirements are therefore likely to exceed the relevant Initial Capital Requirement. Because of the limited nature of their activities, which pose limited risks to counterparties or customers, Category 3 investment firms are not required to apply Risk-based Capital Requirements. They are only required to comply with their Initial Capital Requirement.