Tesco 2011 Annual Report Download - page 59

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TESCO PLC Annual Report and Financial Statements 2011
—
55
Overview Business review Governance Financial statements
Principal risks Key controls and mitigating factors
TESCO BANK/FINANCIAL SERVICES RISKS CONTINUED
Operations
Operational risk is the risk of loss caused by human error, ineffective
or inadequately designed processes, system failure or improper
conduct (including criminal activity)
A significant amount of services and processes are provided by
third-party service providers and currently a key operational risk
to the business is a failure by an outsourced provider
• The Bank has low appetite for operational risk, although it accepts
higher risk in the short term as a result of the transformation
programme, with the operational risk framework overseen by a
dedicated unit within independent Risk function
• Risk registers maintained across the Bank which capture and quantify
the risks arising in each of the commercial, insurance, operations and
central functions areas
• Third-party services are managed through a series of Commercial
Services Agreements (CSAs) with effective oversight arrangements
established to ensure CSAs are delivered in compliance with
contractual terms
• Regular reporting of operational risk information and performance,
including financial crime, against risk appetite to Tesco Bank’s Risk
Management Committee, Board Risk Committee and Board
Transformation programme
The Bank has embarked on a significant transformation programme to
develop and embed its own infrastructure to allow it to migrate systems
and support from the Royal Bank of Scotland Group infrastructure
In addition, the Bank has well-developed plans for launching
mortgages, subject to FSA approval. Vertex, a leading global Customer
Management Outsourcing business, will support entry into the
mortgage market by providing IT application platforms and customer
sales and service for the Bank’s mortgage business. Current accounts
are another key element in widening the Bank’s product range with the
customer proposition and detailed programme plans currently being
developed. The addition of new products adds further to the
complexity and delivery challenge of the transformation programme
• The Transformation Delivery Group (TDG) is the key governance
forum for the delivery of the programme objectives. The forum is
chaired by the Bank’s Chief Operating Officer with representation
across all areas of the Bank including Commercial, Operations, IT, Risk
and Finance
• Strong programme governance in place with TDG supported by
Programme Implementation Boards and Project Control Committees
• Project management disciplines in place, including detailed
programme plans and risk and issue management to enable effective
management of the programme scope, delivery timelines and
adherence to budget
• Ongoing programme of audit reviews, risk profiles and ‘health checks’
with monthly reporting to Tesco Bank’s Risk Management Committee,
Audit Committee and Board