STRATEGIC REPORT
FINANCIAL STATEMENTS
Governance
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 monitored the progress of various actions that had been agreed following a review of risk management and control activities, and culture conducted in 2021 including an action to further delineate the activities of Business Operations (“1st Line”) and Oversight Functions (“2nd Line”). The Committee now receives an annual report on the delineation of activities as well as a regular summary of risk opinions given by the 2nd Line on work conducted by the 1st Line requiring the attention of the Boards or Board Committees. Following a review of the controls framework in 2021, it was agreed by the Committee that certain developments were required to enhance and streamline processes. The Committee received regular reports on activity to enhance the documentation of the control environment over non-financial reporting core risks to ensure the Group’s activities continue to evolve in line with leading practice. Separate updates on the approach to implementing the financial control reporting 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, Group Internal Audit are reviewing the completeness and effectiveness of both the Financial Reporting and Non-Financial Reporting Controls Framework as they develop and will report their findings to the Committee including any concerns that require further attention. During the year, key risk indicators were developed in relation to Just’s risk culture following a review conducted in 2021. The Committee received the first of its new biannual reports on risk culture which includes management information on the key risk indicators and observations from the Group Risk function. This facilitated a constructive discussion on the positive developments and areas requiring more focus by the business in the year ahead. The Committee also considered key findings from the risk culture questions included in an annual survey to colleagues. This provided a useful insight for the Committee as to how our colleagues feel about Just’s risk culture and the survey highlighted key themes that required further attention. The Committee also reviewed findings from an in depth review of the process for risk event and breach reporting. The Committee was satisfied that, overall, there is a healthy risk culture to report risk events and breaches, and that processes are in place to address any weaknesses identified as part of ongoing monitoring and oversight. The 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 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 considered key themes which emerged from the analysis undertaken. This included understanding changes in the macroeconomic regime and the associated impact on Just’s risk profile and business model, and capital, liquidity and human factors that require continued focus to achieve the Group’s growth ambitions. 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 operational and conduct risk, strategic risk and reputational risk. Further details of the Group’s principal risks can be found in the Principal risks and uncertainties report. 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 recovery plan in 2022, 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 impacting capital and liquidity. When considering the key execution risks of the run-off Plan, the Committee was supportive that the scenarios had evolved to be more 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. A comprehensive review of the risk appetite framework was undertaken in 2022 to ensure it continued to align with developments in the Group’s strategy and business plan, risk preferences and regulatory capital model. There was extensive engagement on the decision making framework and how to rank key risks for impact and likelihood during Committee workshops and meetings in the year. The Directors considered the appropriateness of the risk appetites, against which the business plan and strategy are assessed, and agreed on various changes which included updates to the overarching capital risk appetite statement to better align it with the recovery plan and run-off plan. In addition, the Committee agreed to change the risk expression of “seek” to “prefer” and to change the risk preference for various lower level risks to reflect the Director’s discussions in the risk appetite workshops held during the year. The various changes were recommended by the Committee and subsequently approved by the Group Board. The Committee agreed that further consideration should be given to the interest rate risk appetite framework in early 2023 taking into consideration recent events in the macroeconomic environment to determine whether any refinements are required. During the year, the Committee also considered options on the approach towards conduct risk management to ensure that it continued to receive the appropriate level of focus within the wider risk management framework. It was concluded to rename operational risk as conduct and operational risk and to update the risk definition and risk appetite statement to reflect the addition of conduct risk as a core risk category. The recommended change was subsequently approved by the Group Board. A proposal to convene nested meetings of the Committee and the JRL and PLACL Investment Committees was considered and approved by the respective Committees during the year. The additional meetings commenced in January 2023 and will be held biannually. The key purpose of the nested Committee meetings is to review the key investment activities to ensure they are in line with risk appetite and to oversee any proposed changes to risk frameworks that are impacted by investment activities, and ensure they are effectively and efficiently challenged before being recommended for approval.
RISK MANAGEMENT AND CONTROLS FRAMEWORK
RISK CULTURE
ORSA
RECOVERY AND RUN-OFF PLANS
RISK APPETITES
INVESTMENT RISK OVERSIGHT
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