RBS 2014 Annual Report Download - page 128

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RBS – Interim Results 2015
Summary risk factors
○ Substantial investments are being made in the Group’s IT and operational structure through
targeted investment and rationalisation programmes as part of the IT and Operational Investment
Plan. Any failure by the Group to realise the benefits of this IT and Operational Investment Plan,
whether on time or at all, could have a material adverse effect on the Group’s business and its
ability to retain or grow its customer business and remain competitive.
● The Group’s ability to implement its Transformation Plan and its future success depends on its
ability to attract and retain qualified personnel. The Group could fail to attract or retain senio
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management, which may include members of the Group Board, or other key employees. The Group’s
changing strategy has led to the departure of many talented staff. Implementation of the Group’s
Transformation Plan, and in particular of the ring-fence and restructuring of the Group’s CIB business,
as well as increased legal and regulatory supervision, including the implementation of the new
responsibility regime introduced under the Financial Services (Banking Reform) Act 2013 in the UK,
(the “Banking Reform Act 2013”) including the new Senior Persons Regime, may further hinder the
Group’s ability to attract or retain senior management and other skilled personnel. Following the
implementation of CRD IV and the Government’s views on variable compensation, there is now a
restriction on the Group’s ability to pay individual bonuses greater than fixed remuneration, as well as
extended deferral and clawback periods, which may put the Group at a competitive disadvantage.
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inability to attract and retain qualified personnel could have an adverse impact on the implementation
of the Group’s strategy and regulatory commitments.
● The Group has been, and continues to be, subject to litigation and regulatory and governmental
investigations (including active civil and criminal investigations) that may impact its business,
reputation, results of operations and financial condition. Although the Group settled a number o
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legal proceedings and regulatory and governmental investigations during 2014 and the six months
ended 30 June, 2015, the Group is expected to continue to h ave material exposure to litigation,
regulatory and governmental proceedings in the short to medium term. Adverse regulatory,
governmental or law enforcement proceedings or adverse judgments in litigation (including
settlements of any such proceedings) could result in restrictions or limitations on the Group’s
operations, give rise to additional legal claims, or have a material adverse effect on the Group’s
reputation, results of operations and capital position. The Group also expects greater regulatory and
governmental scrutiny for the foreseeable future particularly as it relates to compliance with historical,
existing and new laws and regulations.
● Following the election in May 2015 in the UK, there is uncertainty around how the policies of the
recently elected Conservative government may impact the Group, including the referendum on the
UK’s membership of the EU currently proposed to be held by the end of 2017. The implementation o
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these policies, including the outcome of the EU referendum and consequences for the UK and its
constituent countries arising from it, could significantly impact the environment in which the Group
operates and the fiscal, monetary, legal and regulatory requirements to which it is subject.
● Operational and reputational risks are inherent in the Group’s businesses, but are heightened as a
result of the implementation of the Transformation Plan. Employee misconduct may also result in
regulatory sanctions and serious reputational or financial harm to the Group.