Risk and the board of directors
The directors are ultimately responsible for the group’s risk management system and for reviewing its effectiveness. There is a regular schedule for the board to consider the group’s significant risks and mitigating actions. The risk management system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and there is a continuous process in place for identifying, assessing, managing, monitoring and reporting on the significant risks faced by individual group companies and by the group as a whole.
Excom has specific responsibility as the risk management committee for the group’s system of risk management. Excom reviews the group’s significant risks and subsequently reports to the board on material changes and the associated mitigating actions.
Enterprise-wide risk management
Excom views the careful and appropriate management of risk as a key management role. Managing business risk to deliver opportunities is a key element of all our business activities, and is undertaken using a practical and flexible framework which provides a consistent and sustained approach to risk evaluation. Business risks, which may be strategic, operational, financial, environmental or concerning the group’s reputation, are understood and visible. The business context determines in each situation the level of acceptable risk and controls. We continue to seek improvement in the management of risk by sharing best practice throughout the organisation.
Key features of the group’s system of risk management are:
- group statements on strategic direction, ethics and values;
- clear business objectives and business principles;
- an established risk policy;
- a continuing process for identification and evaluation of significant risks to the achievement of business objectives;
- management processes in place to mitigate significant risks to an acceptable level;
- continuing monitoring of significant risks and internal and external environmental factors that may change the group’s risk profile; and
- a regular review by the group of both the type and amount of external insurance purchased, bearing in mind the availability of cover, its cost and the likelihood and magnitude of the risks involved.
In addition to excom’s bi-annual reports to the board on key risks, there is a process of regular reporting to the board through the audit committee on the status of the risk management process. Since 2010 strategic planning, internal audit and other risk control specialist processes have been integrated into line management’s risk processes and simplified risk reporting.
Key reports include those that identify, assess and monitor strategic and operational risks in each division and on a group basis.