RBS 2011 Annual Report Download - page 19

RBS Group 2011 17
An integral role for Risk Management
Risk Management is essential to making RBS
safer and more sustainable. A stronger culture
of risk management and control provides the
foundation for this.
Financial strength and resilience are at the
heart of our Strategic Plan. The plan targets a
credit rating in line with those of our strongest
peers, without government support.
In 2009, the Group Board set four strategic risk
objectives aligned to the Strategic Plan. These
are to:
•maintain capital adequacy;
•deliver stable earnings growth;
•ensure stable and efficient access to funding
and liquidity; and
•maintain stakeholder confidence.
These strategic risk objectives link the Group’s
business strategy to the way we set risk
appetite and manage risk in our business.
We set risk appetite at Group level. It expresses
the maximum level of risk that we will accept
as we deliver our business objectives. We
cascade this to each of our divisions through
two channels. Each division:
•has its own risk appetite statement, based on
its own business plans but also aligned with
those of the Group; and
•sets clear guidance on acceptable limits for
all material types of risk, again aligned with
Group targets.
By setting a clear risk appetite and embedding
a strong risk culture throughout our businesses,
we can identify, measure and control risk
exposures, and respond effectively to shocks.
Key developments in 2011
In 2011, we strengthened our approach to risk
management amidst a challenging external
environment. Areas of progress included:
•redefining the responsibilities of key risk
committees to meet our future needs;
•refining our understanding of the risks we
face and their scale;
•reducing our exposures in line with our
objective of being safe and sustainable;
•enhancing our Group Policy Framework and
continuing assurance;
•improving the quality of our data, including
forward-looking measures; and
•improving our stress-testing capabilities and
embedding them across the Bank.
In the table on the following page, we
summarise the risks we face. We provide a
more detailed discussion of developments
in 2011 in the ‘Risk and balance sheet
management’ section.
This is how we bring the Strategic Plan
to life in our management of risk.
Our business and our strategy
Our approach to risk management
Strategic
risk objectives
Key risk
appetite
measures
Key
frameworks
and limits
Day-to-day
risk
management