Tesco 2011 Annual Report Download - page 61

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TESCO PLC Annual Report and Financial Statements 2011
—
57
Overview Business review Governance Financial statements
Credit risk The objective is to reduce the risk of loss arising from
default by parties to financial transactions across an approved list of
counterparties of good credit quality. The Group’s positions with these
counterparties and their credit ratings are routinely monitored.
Tesco Bank retail credit risk is managed through the credit risk policy
framework, which is agreed through the Tesco Bank Risk Management
Committee and defines limits and standards at all stages of the
customer lifecycle, including new account sanctioning, customer
management and collections and recoveries activity. Customer credit
decisions are managed principally through the deployment of bespoke
credit scorecard models and credit policy rules which restrict specific
areas of lending, and an affordability assessment which determines a
customer’s ability to repay an outstanding credit amount. Wholesale
counterparty credit risk limits are managed in accordance with a control
framework, approved by the Tesco Bank Risk Management Committee,
which sets limits based on counterparty creditworthiness and
instrument type. Tesco Bank continues to use Fitch, Moody’s and
Standard & Poor’s ratings as part of the credit assessment process.
Insurance We purchased assets, earnings and combined liability
protection from the open insurance market for higher value losses only.
The risk not transferred to the insurance market is retained within the
business by using our captive insurance companies, ELH Insurance
Limited in Guernsey and Valiant Insurance Company Limited in the
Republic of Ireland. ELH Insurance Limited covers Assets, Earnings and
Combined Liability, while Valiant Insurance Company Limited covers
Combined Liability only.
Statement of compliance
This Business Review has been prepared in accordance with the
requirements for a business review under the Companies Act 2006.
The Business Review’s intent is to provide information to shareholders
and should not be relied on by any other party or for any other purpose.
Cautionary statement regarding forward-looking
information
Where this review contains forward-looking statements, these are
made by the Directors in good faith based on the information available
to them at the time of their approval of this report. These statements
should be treated with caution due to the inherent risks and
uncertainties underlying any such forward-looking information.
The Group cautions investors that a number of important factors,
including those in this document, could cause actual results to differ
materially from those contained in any forward-looking statement.
Such factors include, but are not limited to, those discussed under
‘Principal risks and uncertainties’ on pages 51 to 57 of this Annual Report.