Risk Management Policy
Management of risk, particularly preservation of capital, has been a primary objective of the Group in all its business activities. The Company is committed to ensuring that its system of risk oversight, management and internal control complies with the Principles and that its culture, processes and structures facilitate realisation of the Group’s business objectives, including potential opportunities, while managing adverse effects and preserving capital.
The Group has adopted a Risk Management Policy, consistent with Australia/New Zealand Standard 4360, which clearly defines responsibilities for managing risk under the Group’s risk management process. All material risks of the Group’s business, including operational, financial, legal and compliance risks related to business unit transactions, investment management mandates, advisory mandates and principal investments, are required to be regularly identified, managed, monitored and reported. Methods for treating and mitigating risks include transferring, reducing, accepting or passing on risks following assessment using a variety of methods.
Primary responsibility for managing risk rests with the Group’s business unit leaders and functional group heads, while the Board, through its Audit & Risk Management Committee, retains ultimate responsibility for risk management. Each Business Unit and Functional Unit has developed a Risk Management Plan to further strengthen the Group’s operational risk control framework.
One of the cornerstones of the Group’s risk management approach is a well defined system of delegated authorities with respect to the commitment of capital and an investment approval process which brings rigour to the selection, assessment and approval of investment risks assumed under the Group’s principal investment activities. Matters such as legal, accounting, tax and general risk assessment issues are considered in each case. The Group’s most senior Executives are involved in major decisions, with all capital investments above a specified threshold requiring approval of the full Board.
The principal features of the Group’s strategy for managing the investment of its capital are:
- centralised decision making on all activities involving the commitment of capital;
- involvement of the Group's most senior executives in major decisions;
- defined limits of authority for executives to commit capital;
- quarantining the investment risks with special purpose vehicles; and
- allocating risks to the parties best able to manage them.
Material risks are reported to the Board through the Audit & Risk Management Committee and the Board has worked with management to implement policies to address particular identified risks. The Board participates in regular updates (as required) from management on material aspects of the business of the Group, including material risks. In the case of any particular major risk materialising, relevant members of senior management and the Chief Executive Officer are responsible for ensuring the Board is fully informed of, and for discussing with the Board, the steps taken to address that risk.
Under the direction of the Group Risk Manager, the Group has continued to enhance its risk management framework. The Group Risk function plays a key role in developing and building an approach to assist business units in identifying, monitoring and treating risk and in reporting material risks to the Audit & Risk Management Committee. Key focus areas for each business unit and function are identified in a Risk Management Plan and progress in implementing action plans is monitored via a management Risk and Control Committee which meets quarterly.
The Group’s Compliance Function, reporting to the Group General Counsel, promotes a compliance conscious culture while ensuring the Group complies with regulatory requirements across its business units, functions, and group entities. In addition to the expansion of the compliance group to support the growth of the funds platform, additional resources were also added at the Group level to further enhance the operation of the Group compliance framework.
To facilitate monitoring and evaluation of the effectiveness of internal controls, the Group has established accounting policies, reporting and risk management and compliance systems to keep the Audit & Risk Management Committee informed of strategic, reputational, financial and operational risks facing the Group. Quarterly management certification confirms that appropriate internal controls are in place and that the Group Risk Management Policy and other key guidelines and procedures are being observed.
The Group’s Internal Audit function, operating under a written charter from the Audit and Risk Management Committee, provides independent reporting to the Audit & Risk Management Committee with respect to the management of risk and also provides comment on the effectiveness of the design and operation of controls across the Group.