FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
MATTERS CONSIDERED
HOW THE COMMITTEE ADDRESSED THE MATTER
RISK GOVERNANCE AND OVERSIGHT
The Committee reviewed and approved the risk management plan for the year and ensured that the risk framework continued to be developed in line with the business needs, and that policies and practices were kept up to date. During the year, the Committee carried out a review of risk management and control activities, and Just’s culture to ensure the Group’s activities continue to evolve in line with leading practice. An external third party was engaged to undertake an independent assurance review in order to assess the risk management controls, practices and culture in place within the Group. The findings were presented to the Committee and the Board for consideration. Whilst many good practices were observed including the Group’s strong sense of purpose for its customers, various matters were identified for further development including the further delineation of Lines One and Two, and the refinement of Board and Committee papers to ensure that they balance quantitative analysis with a qualitative overlay. The findings from a review of the controls framework were also considered by the Committee. It was concluded that the controls framework is fit for purpose but the Committee agreed that certain developments were required to enhance and streamline processes. This included the implementation of a financial reporting controls framework, which will be a key focus area for the Finance team in 2022. The Committee requested a more formal process to be established for the reporting of lessons learnt frommajor projects during the year. After considering a proposal presented by management, the Committee agreed that the Board should receive half-yearly reports on the overall Change programme status containing sections on lessons learnt from projects and benefits management. Any more immediate risk concerns emerging from projects continue to be reported through the Group Chief Risk Officer to the Committee. The Group Own Risk and Solvency Assessment (“ORSA”) is a key on-going process for identifying, assessing, controlling, monitoring and reporting the risks to which the Group is exposed and to assess the capital adequacy of the Group and its life companies. The Committee considered and recommended to the Group Board for subsequent approval, the annual ORSA report during the year, which provided a risk review of the Group as at a specific date together with a forward-looking assessment of the key risks it faces. The Committee also received quarterly updates on the Group’s evolving risk profile for review and discussion. Key areas of focus for the Committee included the management of residential property risk, longevity risk and conduct risk. The Committee also received updates on the Group’s operational risk position and the steps taken to ensure management seeks to move risks back within appetite in a reasonable timeframe. The Committee also received updates on the impact of COVID-19. Further details of the Group’s principal risks can be found on pages 60 to 63. Each year, the Committee conducts in-depth reviews of the Group’s Recovery Plan and Run-Off Plan and the attendant risks. As part of the review of the Run-Off Plan in 2021, the Committee discussed the philosophy behind which capital risk appetite and liquidity risk appetite should be determined in the event of run-off. After consideration, the Committee recommended, and the Group Board subsequently approved, the Recovery Plan and Run-Off Plan. The Committee considered the appropriateness of the risk appetites, against which the business plan and strategy are assessed, and concluded that they should remain unchanged in 2021. It was agreed that a comprehensive review be undertaken in 2022 to ensure the risk appetite framework continues to align with developments in the Group’s business plan and strategy, risk preferences and regulatory capital model. The Committee provided oversight and challenge on the project to establish an operational resilience framework to meet defined regulatory requirements for operational risk during the year. The Committee assessed and approved the Important Business Services that are in scope of the framework, and debated and approved the associated impact tolerances. The Committee also received updates on the status of the Group’s wider operational resilience framework, business continuity planning, disaster recovery arrangements and information security position during the year. During the year, there continued to be a focus on the key financial risks and operational risks to the Group arising due to the COVID-19 pandemic. Financial risks considered included, amongst others, short and long-term liquidity risk, property risk, investment credit risk and interest rate risk. The prospect of house price movement due to economic uncertainty was discussed given the Group’s property risk exposure. Longevity risk also received close attention due to mortality uncertainty arising from the direct and indirect impact of COVID-19. Operational risks due to the COVID-19 pandemic were reviewed including the impacts on our people, productivity, technology and third party providers. Steps taken by the Group to ensure the mental and physical wellbeing of colleagues, particularly during periods of lockdown was a key area of interest for the Committee. The Committee also received reassurance that the necessary cyber security measures were in place for remote working and that appropriate processes and controls were in place to mitigate the risk of fraud. Protecting vulnerable customers during this difficult period was also a key area of concern for the Committee. The Committee was satisfied with the steps taken by the Group to protect its key stakeholders’ needs, and to assess the direct and indirect risks impacting the business, including property risk.
RISK CULTURE, GOVERNANCE, CONTROLS AND DECISION MAKING
ORSA
RECOVERY AND RUN-OFF PLANS
RISK APPETITES
BUSINESS RESILIENCE
OPERATIONAL RESILIENCE FRAMEWORK
COVID-19
91
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