RBS 2009 Annual Report Download - page 224

RBS Group Annual Report and Accounts 2009222
Board Risk Committee Report
Following publication of the Walker review’s initial recommendations in
July 2009, the Board approved the creation of a Board Risk Committee.
Terms of Reference for the Board Risk Committee, which are compliant
with the final Walker review recommendations published on 26
November 2009, are available at www.rbs.com. The terms of reference
will be considered annually by the Board Risk Committee and approved
by the Board.
The current members of the Board Risk Committee are Philip Scott
(Chairman), Colin Buchan, Sandy Crombie, Archie Hunter and Joe
MacHale. All members of the Board Risk Committee are independent
non-executive directors.
The Board Risk Committee will hold at least six scheduled meetings
each year. The Board Risk Committee held its first meeting on 19
January 2010 and a second on 22 February 2010. Meetings are held as
soon as practicable prior to Group Audit Committee meetings to ensure
that the work of the two Committees is coordinated and consistent. A
meeting will be held immediately prior to submission of the interim and
annual financial statements to the Board and the quarterly Interim
Management Statements. This core programme will be supplemented
by additional meetings as required. Board Risk Committee meetings will
be attended by relevant executive directors, risk management, finance
executives and the internal auditors. External advice may be sought by
the Board Risk Committee where considered appropriate. The Board
Risk Committee has not sought external advice to date.
The Board Risk Committee is responsible for:
•providing oversight and advice to the Board in relation to current and
potential future risk exposures of the Group and risk strategy,
including determination of risk appetite and tolerance;
•assisting the Board on such other matters as may be referred to it by
the Board;
•promoting a risk awareness culture within the Group; and
•reporting to the Board, identifying any matters within its remit in
respect of which it considers that action or improvement is needed
and making recommendations as to the steps to be taken.
Qualitative and quantitative information regarding the risks arising from
the Group’s financial instruments required under International Financial
Reporting Standard (IFRS) 7, are incorporated within the financial
statements and Business review.
The Board Risk Committee will play a key role in the review, design and
implementation of risk management and measurement strategies and
risk management policy across the Group.
The Board Risk Committee will consider the Group’s risk profile relative
to current and future Group Strategy. The Committee will report to the
Board following each meeting on its consideration of the risk profile of
the Group and any longer term macro or perceived strategic threats to
the Group and will make recommendations as appropriate.
The Group risk appetite framework remains under development and
work continues on enhancing risk limits and key risk measures. Risk
appetite will be regularly reviewed by the Committee and the Committee
will make recommendations to the Board as to risk appetite and
tolerance as part of this ongoing process.
The Committee will also consider the Group’s exposure to country,
single name and sector concentration risk and will ensure rigorous
stress and scenario testing of the Group’s business is undertaken. The
output of this testing will be reviewed by the Committee with a view to
ensuring appropriate actions are taken where necessary. In due course
it will make recommendations to the Group Board regarding related
authorities, limits and mandates.
As required under the Walker review, the Committee will meet as
required to review the due diligence of any proposed strategic
transaction (involving a merger, acquisition or disposal) prior to the
Group Board approval of the transaction.
The Committee will approve the operational plan for RBS Risk
Management. It will consider the adequacy and effectiveness of
resource and the scope and nature of the work undertaken by the
function.
The Committee will consider the adequacy and effectiveness of the
technology infrastructure supporting the finance and risk management
framework.
The Committee will review the risk input to divisional bonus pools and
will provide advice to the Remuneration Committee on risk weightings to
be applied to performance objectives which are incorporated within the
incentive structure for the Group’s senior executives.
The Committee will ensure that it has substantial oversight of the work
being undertaken within the divisions through the existing Divisional
Audit Committee structure, in conjunction with the Group Audit
Committee.
Philip Scott
Chairman of the Board Risk Committee
24 February 2010
Corporate governance continued