Risk management framework

Our risk management framework

Rigorous and consistent risk management is embedded across the Group through our Risk Management Framework (RMF), comprising our systems of governance, risk management processes and risk appetite framework.

Our RMF is designed to identify, measure, manage, monitor and report the significant risks to the achievement of our business objectives. It is embedded throughout the Group, and is codified through our risk policies and business standards, which set out the risk strategy, appetite, framework and minimum requirements for the Group’s worldwide operations.

Risk management framework information graphic

Our risk appetite framework

Our risk appetite framework comprises:

  • Overarching risk appetites: Quantitative expressions of the level of risk we can support (e.g. capital we are prepared to put at risk).
  • Risk preferences: Qualitative statements on the risks we believe we are capable of managing, risks we can support but need to be controlled, and risks we seek to avoid or minimise.
  • Operating risk limits and tolerances: Quantify our specific boundaries (e.g. limits on specific risks).

Our Board has approved three risk appetite statements:

  • Solvency II capital: Based on Solvency II eligible own funds at risk in an extreme loss event over a one-year period.
  • Liquidity: Based on stressing forecast central liquid assets and cash inflows and outflows over a specified time horizon (covering Group centre costs, debt costs and dividends).
  • Operational risk profile: Based on effective management of risks against tolerance limits.

Our risk appetites and preferences are clearly defined. We refresh them on a regular basis as part of our planning process.

Our long-term sustainability depends on the protection of franchise value and good relationships with customers and other stakeholders. As such, our Board has made an overarching risk preference statement that we won’t accept risks that materially impair our reputation and we require that our customers are always treated with integrity.

You can read more about our approach to risk in the Risk and Risk Management section of our Annual Report and Accounts.