RBS 2005 Annual Report Download - page 88

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Operating and financial review
Operating and financial review continued
Risk management
Governance framework
The Board sets the overall risk appetite and philosophy for the Group. Various Board and executive sub-committees support these
goals, as follows:
•Group Audit Committee is a non-executive committee that
supports the Board in carrying out its responsibilities for
financial reporting including accounting policies and in
respect of 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 is supported by
Group Internal Audit which provides an independent
assessment of the design, adequacy and effectiveness of
the Group’s internal controls.
•Advances Committee is a board committee that deals with
all transactions that exceed the Group Credit Committee’s
delegated authority.
In addition to the responsibilities at Board level, 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
the following committees:
•Group Risk Committee (“GRC”) is an executive risk
governance committee which recommends and approves
limits, processes and policies in respect of the effective
management of all material non-balance sheet risks across
the Group.
•Group Credit Committee (“GCC”) is a credit approval
committee which deals with all transactions that exceed the
delegated authority of divisional credit committees.
•Group Asset and Liability Management Committee
(“GALCO”), is an executive committee which is responsible
for reviewing the balance sheet, funding, liquidity, structural
foreign exchange, intra-group limits, capital adequacy and
capital raising across the Group as well as interest rate risk
in the banking book. In addition, GALCO monitors and
reviews external, economic and environmental changes
affecting such risks.
These Committees are supported by two dedicated group level
functions, Group Risk Management (“GRM”), which has
responsibility for credit, market, regulatory and enterprise risk
and Group Treasury which is responsible for the management
of the Group’s balance sheet, capital raising, intra group credit
exposure, liquidity and hedging policies. Both functions report
to GEMC and the Group Board through the Group Finance
Director and play an active role in assessing and monitoring
the effectiveness of the divisional risk management functions.
Heads of Group Risk Mangement and Internal Audit have
direct access to the Group Chief Executive and the Chairman
of the Group Audit Committee.
Group Audit Committee
Group Board of Directors
Advances Committee
Group Executive
Management Committee
Group Credit Committee
Group Asset and
Liability Management
Committee
Group Risk Committee
Board Committees
Executive Committees
Key