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Terms Of Reference – Risk Committee

  1. Composition of the committee

The Board Risk Committee is a sub-committee of the Board. Each member of the Board is also a member of the Committee. The Committee is chaired by one of the Board’s independent directors, who is expected to have a working knowledge of, in particular, liquidity, capital and risk management issues and stress testing. The holder of the SMF 16 Compliance Oversight Function, is normally expected to attend meetings.  Other members of the management team and external advisors (such as internal and external audit) may also attend meetings as appropriate.

  1. Quorum

The quorum necessary for the transaction of business shall be three members. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.

  1. Duties

The Committee is tasked with identifying the key risks facing the Society and determining their importance given their potential impact and likelihood of occurrence. The Committee will also ensure that the Society’s response to all identified key risks is appropriate.

More specifically, the Committee will:

i)  Review and maintain the Risk Management Framework (RMF). This document includes: the Society’s Statement of Risk Appetite (SRA), Statement of Operational Risk Appetite, Statement of Conduct Risk Appetite and Financial Crime Risk Appetite Statement. Ensure that the statements adequately identify all the key risks faced by the Society (including risk to Members) and that for those risks it also identifies appropriate management responses. These documents will be reviewed at least annually and more frequently if dictated by market conditions.

ii)  Review the Society’s Risk Strategy including ensuring that adequate resources are allocated to the management of all material risks, and that the Risk function itself has the required level of skills, experience and capabilities that it needs to support the Society in the achievement of its risk strategy and objectives. This document will be reviewed annually or more frequently if dictated by market conditions.

iii)  Review the Statement of Key Risk Indicators provided to the Committee by executive management. The Committee is to be satisfied that all key risks are adequately reported on, including key project risk. The Committee is to ensure that either the Society is remaining within its risk appetite in the various aspects of its business, or that management is taking appropriate mitigating actions where the risk appetite is being, or appears to be at risk of being, breached.

iv)  Review and approve the Society’s Internal Capital Adequacy Assessment Process (ICAAP), ensuring the principal risks identified by the RMF are adequately considered. The document will be reviewed at least annually and more frequently if dictated by market conditions.

v)  Review and approve the Society’s Capital Requirements Directive Pillar 3 disclosures and Pillar 3 Policy document. These documents will be reviewed at least annually and more frequently if dictated by market conditions.

vi)  Review and approve the Society’s Reverse Stress Test Framework prepared in accordance with the requirements of SYSC 20. The document will be reviewed at least annually and more frequently if dictated by market conditions.

vii)  Review and approve the Group Operational Risk policy statement. The document will be reviewed at least annually and more frequently if dictated by market conditions. This review will also consider whether the Society should maintain an independent risk governance structure.

viii) Review the Society’s Recovery Plan and Resolution Pack and recommend its approval by the Board.

ix)  Ensure the principal risks identified by the RMF are adequately considered within the Society’s internal audit programme.

x)  Be the reporting body for ALCO. The minutes are to be published to all Board Risk Committee Members. Note that due to the timing of respective meetings, the regular update following each ALCO may be made to the Board rather than to the Board Risk Committee.

xi)  Hold responsibility for review of the Internal Liquidity Adequacy Assessment Process (ILAAP), which includes a review of documents approved at ALCO including the Treasury Risk Policy Statement, Liquidity Contingency Plan, Contingency Funding Plan and Treasury Strategy Update.

xii)  Recommend to the Remuneration Committee the detail of that part of the Finance Director’s job description relating to risk governance, or any amendments thereto. If risk governance becomes an executive responsibility of any other executive director, the Committee will make similar recommendations to the Remuneration Committee concerning that individual’s job description.

xiii)  Through the review of ALCO minutes review whether prices of liabilities and assets offered to customers take fully into account the firm’s business model and risk strategy (SYSC 7.1.18 R (3)

xiv) Review the day-to-day risk management and oversight arrangements of the executive (SYSC 21.1.5G (d)).

xv)  Examine, without prejudice to the tasks of the Remuneration Committee, whether incentives provided by the remuneration system take into consideration risk, capital, liquidity, and the likelihood and timing of earnings (SYSC 7.1.20R).

xvi)  Provide advice to the Remuneration Committee on risk weightings to be applied to performance objectives incorporated into the incentive structure for the executive (SYSC 21.1.5G (f));

xvii) Consider and give due regard to any relevant advice from the Audit & Compliance Committee or Internal Audit function concerning the effectiveness of the Society’s current control framework.

xviii) Remain alert to the possible need for external expert advice and support on any risk issue, taking action to ensure that they receive such advice and support as may be necessary to meet their responsibilities effectively (SYSC 21.1.6G).

  1. Meetings

The Committee will meet at least four times per year and more frequently if considered necessary. Minutes of each meeting will be taken and circulated to each member prior to the next meeting. Meetings will normally coincide with the dates of Board meetings and a timetable of meetings for the coming 12 months will be published annually.

  1. Committee effectiveness

The Committee will review its effectiveness on an annual basis.

February 2018