RBS 2011 Annual Report Download - page 271

RBS Group 2011 269
Report of the Board Risk Committee
Role of the Board Risk Committee
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 future risk strategy, including determination
of risk appetite and tolerance. The Committee reviews the performance of
the Group relative to risk appetite and provides oversight of the
effectiveness of key Group policies. The Board Risk Committee has
responsibility for promoting a risk awareness culture within the Group.
Authority is delegated to the Board Risk Committee by the Group Board
and the Committee will report and make recommendations to the Group
Board as required. The terms of reference of the Board Risk Committee
are available on the Group’s website www.rbs.com and these are
considered annually by the Board Risk Committee and approved by the
Board.
Meetings and visits
The Board Risk Committee held six scheduled meetings and three
additional ad hoc meetings in 2011. Meetings are held alongside Group
Audit Committee meetings to ensure that the work of the two Committees
is coordinated and consistent. Board Risk Committee meetings are
attended by relevant executive directors, risk management and finance
executives and the internal auditors. External advice may be sought by
the Board Risk Committee where considered appropriate. During 2011,
the members of Board Risk Committee in conjunction with the members
of the Group Audit Committee took part in an annual programme of visits
to the Group's business divisions and control functions. Details about the
programme of visits is set out in the Report of the Group Audit Committee
on page 264.
Membership
The Board Risk Committee is comprised of at least three independent
non-executive directors. The Chairman and members of the Committee,
together with their attendance at meetings, are shown below.
Attended/
scheduled
Philip Scott (chairman) Independent 6/6
Sandy Crombie Independent 5/6
Tony Di Iorio (1) Independent 1/1
Joe MacHale Independent 6/6
Brendan Nelson Independent 6/6
Former member
Colin Buchan (2) Independent 4/5
Notes:
(1) Joined the Committee on 1 September 2011.
(2) Retired from the Committee on 5 August 2011.
Philip Scott, Tony Di Iorio and Brendan Nelson are also members of the
Group Audit Committee. This common membership ensures effective
governance across all Finance and Risk issues, and that agendas are
aligned and overlap is avoided.
Principal activity of the Board Risk Committee during 2011
Risk strategy and policy
The Board Risk Committee is fully engaged in the risks deriving from the
recently announced organisational changes to form the new Markets and
International Banking division and consideration of the impact of the
FSA’s Recovery and Resolution programme and where possible the ICB
proposals on the wider Group, will be a priority of the Committee over the
course of 2012 and beyond.
Development of the Group Policy Framework has been a major project
for the Group in 2011 and the Board Risk Committee has provided
oversight and direction to the project. Standards have now been
developed, benchmarked and are now being implemented across the
organisation. The Board Risk Committee will continue to ensure that the
standards are properly embedded globally and will review the output of
assurance testing to ensure that the standards are operating effectively.
Risk governance across the Group, including the operation of the Board
Risk Committee, will be reviewed pursuant to the Corporate Governance
Policy standard and the Committee will take forward any
recommendations from that review during the course of 2012.
The Committee has overseen the development of a conduct risk appetite
statement and framework during 2011. The Committee regards conduct
risk to be a fundamental tenet of risk and will receive reports in 2012 on
the implementation of the standard and framework across the
organisation, including how conduct risk is considered from the point of
product inception to conclusion of a relationship with a customer. The
terms of reference of the Committee have been extended to cover
conduct risk specifically.
Risk profile
The Committee receives a detailed report on key risks and metrics at
each meeting and receives an oral report from the Chief Risk Officer at
each meeting on the key risks to the organisation. This enables the
Committee to identify the key risk areas where more focus should be
directed. The Committee reported 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 made
recommendations as appropriate.
The Board Risk Committee has assumed responsibility on behalf of the
Group Board for considering key areas of risk in a deeper level of
granularity. In particular, during 2011 it has played an important
governance role in the oversight and remediation of regulatory issues in
the RBS Americas region. Brendan Nelson has personally provided
oversight of the Executive Steering Group established with responsibility
for remediation of known issues in the region and the Committee receives
regular reports on progress.
In response to market events, the Committee has reviewed its controls
for potential weaknesses from a rogue trading perspective. This review
identified that most controls were effective and the Committee will
oversee the remedial work that is underway to resolve all potential
weaknesses identified.