In our ordinary course of business we face a number of risks that could affect our business operations.
These risks have been highlighted on page 34 in volume one.
The sections that follow provide information on a number of these risk areas.
Additional risks and uncertainties not presently identifi ed by us or that we currently deem immaterial may in the future also negatively impact our business operations.
The group committees and forums listed below have mandated certain committees and forums within the jurisdictions in which the group operates to support them in their objectives:
Committee Function
Audit committees
Members: Non-executive directors
Chairman: David Friedland (non-executive director) Frequency:
• DLC audit committee – four times a year
• Investec Limited and group audit committee – four times a year
• Investec plc audit committee – four times a year
• See pages 90 and 94 in volume one
• The Internal Audit, Compliance and Operational Risk departments report to the audit committees
Board risk and capital committee (BRCC)
Members: Executive and non-executive directors (senior management by invitation)
Chairman: Stephen Koseff (CEO) Frequency: Six times a year
• See page 97 in volume one
DLC capital committee
Members: Executive and non-executive directors and senior management
Chairman: Stephen Koseff (CEO) Frequency: At least quarterly
• See page 98 in volume one
Executive risk review forum (ERRF)
Members: Executive directors and senior management Chairman: Stephen Koseff (CEO)
Frequency: Weekly
• See page 98 in volume one
Global credit committee
Members: Executive directors and senior management Non-executive directors have a level of oversight which is exercised within the applicable committee Chairman: Glynn Burger (group risk and fi nance director) Frequency: Twice a week
• Considers and approves the granting of credit to counterparties in excess of the mandates granted to divisional and other credit forums on a global basis
• Considers the level of acceptable counterparty and geographical exposures within the board-approved risk appetite framework
• Reviews and approves changes to credit policies and methodologies.
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Committee Function
Group deal forum
Members: Executive directors and senior management. Non- executive directors have a level of oversight which is exercised within the applicable committee Chairman: Glynn Burger (group risk and fi nance director) Frequency: Weekly
• Considers, approves and mitigates the risks inherent in any new product or other non-standard transactions that we are considering
Group market risk forum
Members: Global heads of risk, market risk and the trading desks; senior management; members of the Market Risk teams and other members of Group Risk Management
Chairman: Mark Trollip (global head of market risk) Frequency: Weekly
• Reviews and recommends limit adjustments in all existing products and markets across all desks in the group
• Recommends limits for new products and new markets
• Recommends methodology as to how risks are measured.
Global compliance forum
Members: Compliance representatives of the Investec Limited and Investec plc businesses
Chairman: Bradley Tapnack; Alternate: Kathryn Farndell and Richard Brearley
Frequency: Bi-annually and on ad hoc request
• Review and approval of all group compliance policies across Investec Limited and Investec plc businesses
• Establishing and standardising of group standards where applicable
• Escalation of policies to ERRF and the board for approval as required.
Asset and liability committee (ALCO)
Members: Executive directors, senior management, economist, treasurer, business heads and head of asset and liability management
Chairmen: Glynn Burger (SA), Ian Wohlman (UK), Peter Binetter (AUS) and Craig McKenzie (MAU) Frequency: Monthly (or ad hoc if required)
• Recommends and monitors our funding and liquidity policy and non-trading interest rate risk policy, which translates into a suite of limits that defi ne our risk appetite
• Directs the implementation of the methodology, techniques, models and risk measures for liquidity and interest rate risk management
• Reviews the structure of our balance sheet and business strategies, taking into account market conditions, including stress tests
• Maintains liquidity contingency plans
• The responsibilities of the liability product and pricing forum (a sub-committee of ALCO) are:
– to coordinate and approve pricing of all liabilities issued and other group funding entities so as to achieve the most appropriate funding mix at the best possible cost within the balance sheet targets as set by ALCO;
– to review the liquidity, interest rate and concentration characteristics of all new products and approve their issuance; – to monitor existing products, terms and rates;
– to reprice or close products where appropriate; and – to evaluate continuously the external rates environment
including competitor analysis.
Global operational risk committee
Members: Heads of operational risk, heads of risk, specialist banking, asset management and wealth and investment senior management
Chairman: Bradley Tapnack (global head of compliance and internal audit)
Frequency: At a minimum half-yearly
• Provides support to BRCC and ERRF in the management of operational risk
• Approval of strategy for the management of operational risk within Investec plc and Investec Limited
• Recommends and approves the operational risk management framework, policies and appetite.
Group legal risk forum
Members: Executive directors, senior management and divisional legal managers
Chairman: David Nurek (global head of legal risk) Frequency: Half-yearly (or ad hoc if required)
• Considers and manages legal risks throughout the group.
In the sections that follow the following abbreviations are used on numerous occasions:
ALCO Asset and liability committee FCA Financial Conduct Authority APRA Australian Prudential Regulation Authority FSB Financial Services Board
BoE Bank of England PACC Prudential audit and conduct committee BRCC Board risk and capital committee PRA Prudential Regulation Authority ECB European Central Bank RBA Reserve Bank of Australia ERRF Executive risk review forum SARB South African Reserve Bank
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does not take place as expected, with one party effecting required settlements as they fall due but not receiving settlements to which they are entitled. In terms of our defi nition, settlement debtors receivable in the short term (i.e. less than three days) are excluded from credit and counterparty risk due to market guaranteed settlement mechanisms
– Replacement risk is the risk following default by the original counterparty resulting in the contract holder having to enter into a replacement contract with a second counterparty in order to fi nalise the transaction.
Credit and counterparty risk can manifest as country risk as a result of the geopolitical and transfer risk associated with exposures arising from transactions with borrowers who are resident in a particular foreign country, or dependent on that country’s economy.
Credit and counterparty risk may also arise in other ways and it is the role of the various independent credit committees, assisted by Credit Risk Management, to identify situations falling outside these defi nitions where credit risk may also be present.