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Risk management
Risk management is an integral part of the Group’s corporate agenda. The Group’s risk management approach is to focus on identifying potential events that may affect stakeholders’ returns and to manage the impact of these events within identified parameters. Doing so will provide reasonable assurance for ensuring that risks inherent in the design and execution of the Group’s strategy and in its day-to-day operations are managed in line with the expectations of our stakeholders.
The Charter of the Board of Standard Life plc states that the Board’s responsibility is ‘to establish and maintain a framework of internal controls that enables the financial and non-financial risks of the Group to be assessed and managed’, the Enterprise Risk Management (ERM) framework. It also states that matters reserved for the Board include ‘the approval of the Group risk management policy, and the Group’s financial and non-financial risk policies, and review of their implementation’.
The objectives of the Group’s risk control processes are to identify, assess, control, monitor and report risk profiles across the Group. The risk profile is assessed regularly – at least quarterly – and reviewed by the relevant executives and the Group risk management committees.
The ERM framework is founded upon a strong risk management culture. Key components of this risk management culture include a statement of risk appetite and tolerances and a robust governance structure with clearly defined roles and responsibilities based around a Three Lines of Defence model (detailed in Note 37 Risk management in the Group IFRS consolidated financial statements). Group risk management liaises with the relevant risk functions for each business unit (which form the ‘second line of defence’) in relation to their risk management tools, analysis and management information.
Risk appetites and limits are established across the Group and managed through the ERM policy framework. Group companies define their own risk policies, adopting relevant minimum standards and limits contained within the Group policies. Business units are required to manage risk in accordance with the policy and to take mitigating action as appropriate to operate within risk appetites.
In 2007 the Enterprise Risk Management Committee (ERMC) and supporting Risk Forums were established to further enhance our risk management culture. The ERMC took effect as of October 2007 replacing the Group Asset and Liability Committee and Group Operational Risk Committee. The Group’s ERM framework is described in more detail in the corporate governance report and in Note 37 Risk management in the Group IFRS consolidated financial statements, where further information is provided on risk concentrations and management of risk by business segment.
