98 | Just Group PLC | Annual Report and Accounts 2023
GROUP RISK AND COMPLIANCE COMMITTEE REPORT continued
AREAS OF FOCUS Key areas of focus during the year included the following matters.
Matters considered
How the Committee addressed the matter
RISK MANAGEMENT, CONTROLS AND CULTURE
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. The Committee received reports on activity to enhance the documentation of the control environment over core risks (other than financial reporting) to ensure the Group’s activities continue to evolve in line with leading practice. Separate updates on the financial reporting controls framework were provided to the Group Audit Committee during the year and there has been close engagement between the Chairs of both Committees to ensure the approaches are aligned. In response to a request from the Committee, the Risk Function and Group Internal Audit provided an update on the completeness of key controls and an outline of the assurance activities that were being undertaken throughout 2023 to assess the effectiveness of the overall controls framework. The findings of this assessment will be presented to the Committee in 2024 including any concerns that require further attention. During the year, the Committee received an update on risk culture which included management information on the key risk indicators and observations from the Group Risk function, which facilitated a constructive discussion on positive developments and areas requiring more focus by the business. Work is underway to determine how the Group’s culture and people metrics and associated key performance indicators need to be developed to explicitly reflect the delivery of good customer outcomes under Consumer Duty regulation. The Committee will consider the outcomes of this work and the reporting requirements in 2024. The Committee received updates on risk events and breaches, and considered the controls assurance processes in place to investigate risk events during the year. The Committee was satisfied that, overall, there is a healthy risk culture of reporting risk events and breaches, and that processes are in place to address any weaknesses identified as part of ongoing monitoring and oversight. The Own Risk and Solvency Assessment (ORSA) is the ongoing process of identifying, measuring, monitoring, managing 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 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 main risks it faces. The Committee considered the Group’s readiness to operate effectively in an uncertain environment, the sustainability of the Group’s business model and Just’s ability to recover from various stress events. It considered and agreed recommendations from the Risk function to enhance the ability of the Group to address and withstand the risks identified and they will be monitored to ensure they are implemented effectively. The Committee also received regular updates on the Group’s evolving risk profile for review and discussion throughout the year. This included an in-depth review of the operational risk appetite tolerances and key risk indicators to ensure that the measurement of risk was appropriate and reflected the size and growth ambitions of Just. Further details of the Group’s principal risks can be found on pages 66 to 69. The Committee receives in-depth reviews of the Group’s Recovery Plan and Run-Off Plan and the attendant risks. As part of the review of the Recovery Plan in 2023, the Committee considered whether the Group had credible and realistic options to effect recovery in the event of a range of possible shocks, both short term and medium term, and the impact on capital and liquidity. When considering the main execution risks of the Run-Off Plan, the Committee was supportive that the scenarios were clearly aligned with the Business Plan and Recovery Plan. After consideration, the Committee recommended, and the Group Board subsequently approved, the Recovery Plan and Run-Off Plan. Following a comprehensive review in 2022, the Committee considered the continued appropriateness of the capital, liquidity and operational risk appetites, against which the Business Plan and strategy are assessed, and concluded that the overarching risk appetite statements and overall risk limits should remain unchanged in 2023. The Committee agreed to change the risk preference for traded (derivatives and securities financing) counterparty risks to align it with similar risks, which was subsequently approved by the Group Board. The Committee considered the completeness, adequacy and consistency in approach applied to the operational risk appetite statements, and approved proposed changes to the risk taxonomy and categories, which will be reflected in the enterprise risk management framework in 2024. During the year, the Committee reviewed the challenges and lessons learnt in managing the dynamic relationship between Solvency II capital and IFRS equity exposures to protect shareholder value, including a case study on interest rate management. The discussions led to a proposal to set appetites for financial risks to IFRS equity under IFRS 17. The Committee was supportive of the proposal, which was subsequently approved by the Group Board. The Nested meetings of the Committee considered proposed changes to the investment risk frameworks and investment limits during the year. There was also a discussion on the risks related to the purchase of gilts to support interest rate management of Solvency and IFRS metrics, and how these risks were mitigated. A focus area in 2023, which will continue in 2024, is the oversight of the ongoing development of enhanced credit risk metric measures to support portfolio management and regulatory developments more effectively.
RISK MANAGEMENT AND CONTROLS FRAMEWORK
RISK CULTURE
ORSA
RECOVERY AND RUN-OFF PLANS
RISK APPETITES
INVESTMENT RISK OVERSIGHT
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