RBS 2003 Annual Report Download - page 94

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Operating and financial review continued
Operating and financial review
Risk management
Framework
A number of high-level committees support the Board in the
effective measurement and management of risk. Board sub-
committees have the following roles and responsibilities for
managing risk, capital and liquidity:
•Group Audit Committee – is a non-executive committee that
supports the Board in carrying out its responsibilities for
internal control and risk assessment. The Group Audit
Committee monitors the ongoing process of the
identification, evaluation and management of all significant
risks throughout the Group. The Committee provides an
independent review of risk management and controls.
The Committee is supported by Group Internal Audit which
provides an independent assessment of the adequacy and
effectiveness of the Group’s internal controls.
•Advances Committee – is an executive committee that deals
with all transactions that exceed the Group Credit
Committee’s delegated authority, which in turn approves
facility limits in excess of the authorities delegated to
divisional credit committees.
In addition to the responsibilities at Board level outlined above,
operational authority and oversight is delegated to the Group
Executive Management Committee (“GEMC”), which is
responsible for implementing a risk management framework
consistent with the Board's risk appetite. The GEMC, in turn, is
supported by:
•Group Risk Committee (“GRC”), which recommends and
approves limits, processes and policies in respect of the
effective management of all material risks across the Group.
•Group Asset and Liability Management Committee (“GALCO”)
which is responsible for reviewing the balance sheet,
funding and capital implications of the Group's strategy and
operations. In addition, GALCO monitors and reviews legal,
regulatory and accounting developments affecting balance
sheet risks and capital. It also reviews the effect of external,
economic and environmental changes on the Group's
balance sheet, risks, margins and capital.
•Group Risk Management (“GRM”) reports to the GEMC
through the Group Finance Director and is responsible for
credit, market and enterprise risk measurement and controls
across the Group. An assessment of the adequacy and
effectiveness of each divisional risk management team is
undertaken by GRM on a continuous basis to ensure
effective control of risks. Each divisional risk function has a
direct reporting line to the Director of Group Risk
Management, which reinforces these controls and ensures
independence of risk management within each division.
•Group Treasury (“GT”) also reports to the GEMC through the
Group Finance Director, and is responsible for the management
of the Group’s balance sheet, capital raising, liquidity and
hedging policies. GT assesses and monitors the effectiveness
of the divisional asset and liability management teams.
GRM and GT also respond to various regulatory developments
affecting risk, capital and liquidity management. This includes
working with international and domestic trade associations,
being active with various regulators, especially the FSA, and
encouraging discussions with the main regulatory and political
groups, such as the Basel Committee and the EU Commission.
The principal risks that the Group manages are as follows:
•Credit risk
•Liquidity risk
•Market risk
•Insurance risk
•Enterprise risk