Aviva 2013 Annual Report Download - page 80

Aviva plc
Annual report and accounts 2013
78
Directors’ and Corporate governance report continued
Risk Committee report
Committee role and responsibilities
The purpose of the committee is to assist the Board in its
oversight of risk within the Group through reviewing the
Group’s risk appetite and risk profile in relation to capital and
liquidity, the effectiveness of the Group’s Risk Management
Framework (RMF), the methodology and assumptions used in
determining the Group’s capital requirements, and the
monitoring of prudential regulatory requirements. The
committee also works with the Remuneration Committee to
ensure that risk management is properly considered in setting
the Group’s remuneration policy. During the year the committee
oversaw all aspects of risk management in the Group, including
market, credit, liquidity, insurance and operational risk
(including franchise risk), and their impact on both the financial
and non-financial goals of the Company. In late 2013, oversight
of franchise risk was transferred to the Governance Committee.
The key responsibilities of the committee are to:
 Review the Group’s future risk strategy and its risk appetite,
particularly in relation to capital and liquidity and to make
recommendations on risk appetite to the Board
 Review and challenge the Group’s forward-looking risk
profile against its risk strategy and capital and liquidity risk
appetite and review the drivers of changes, if any, in the
Group’s risk profile
 Review and challenge proposed management actions if the
Group’s capital or liquidity risk position against appetite
reaches the level at which it needs to be escalated to
the committee
 Review the design, completeness and effectiveness of the
RMF relative to the Group’s activities
 Assess the adequacy and quality of the risk management
function and the effectiveness of risk reporting within
the Group
 Review the Group’s investment risk strategy, credit limit
framework and approve individual counterparty exposures
in excess of limits
 Review the governance, methodology and assumptions used
in the Group’s models for determining its economic and
regulatory capital requirements
 Review and approve risk policies
 Satisfy itself that risks to the Group’s business plan and any
capital implications are adequately identified and assessed
by management and that appropriate mitigating actions are
in place
 Ensure that a due diligence appraisal of strategic or
significant transactions due to be proposed to the Board is
undertaken before the Board takes a decision whether to
proceed
 Review the effectiveness of operational controls
 Work with the Remuneration Committee to ensure that risk
is considered in setting the overall remuneration policy for
the Group
 Review relationships with prudential regulatory authorities
in relevant jurisdictions and developments in the prudential
regulatory environment, and review significant actual or
potential breaches of prudential regulation and actions
being taken to address these
Revised committee terms of reference were adopted in
December 2013 following an annual refresh. The full terms of
reference for the committee can be found on the Company’s
website at www.aviva.com/terms-of-reference, and are also
available from the Group Company Secretary.
Committee membership and attendance
The committee comprises independent NEDs only. The table
below shows the committee members during the year and their
attendance at committee meetings.
Membership and attendance
Committee member
Number of meetings
attended Percenta
g
e attendance1
Michael Hawker (Chairman) 7 100%
Glyn Barker 7 100%
Michael Mire2 2 100%
Bob Stein3 4 100%
Russell Walls4 4 100%
1 This shows the percentage of meetings which the committee member attended during the year whilst a
member of the committee.
2 Michael Mire joined the committee on 12 September 2013.
3 Bob Stein joined the committee on 6 March 2013.
4 Russell Walls retired from the committee on 8 May 2013.
The committee met on seven occasions in 2013. The Chairman
of the Company, Group CEO, CRCO, CFO and the CAO
normally attended all committee meetings. Other members of
senior management were also invited to attend as appropriate
to present reports. The committee has held regular private
sessions with the CRCO and the CAO to enable them to raise
any matters of concern to them without any other members of
management present. The Group Company Secretary acted as
the secretary to the committee.
The chairman of the committee reported to subsequent
meetings of the Board on the committee’s work and the Board
received a copy of the agenda and the minutes of each meeting
of the committee. The committee chairman also sat on the
Audit Committee throughout the year and the Remuneration
Committee until 8 May 2013 to ensure that risk considerations
were fully reflected in the decisions of those committees. Bob
Stein is currently a member of both the Risk Committee and the
Remuneration Committee, Glyn Barker is a member of the Risk
Committee and Chairman of the Audit Committee and Michael
Mire is a member of the Risk Committee and the Governance
Committee which ensures the committee is linked to the work
of the other Board committees.
In performing its duties, the committee had access to the
services of the CRCO, CAO, the Group Company Secretary and
external professional advisers.
The chairman followed a programme of attending meetings
of business unit risk committees and, during the year, members
of the committee attended meetings in the UK Life, Ireland Life
and Healthcare, Canadian, French and Italian business units.
In November 2013, the committee chairman hosted a
two-day conference for the chairmen of the risk and audit
committees of the Group’s principal subsidiaries and their Chief
Risk Officers. The agenda included discussions on what it means
to be a Global Systemically Important Insurer (GSII); Solvency II;
raising the bar on internal controls and moving to integrated
assurance; key operational risks and management’s response to
them; cyber crime; conduct risk; and what makes an effective
audit or risk committee.
The committee chairman, with the CRCO, holds a series of
semi-annual conference calls with the major subsidiary board
risk committee chairmen and their Chief Risk Officers, to ensure
that there are no significant risks occurring in the business that
have not been raised through normal reporting routes.
External environment
Financial market conditions during 2013 were more benign than
recent years, benefiting from the maintenance of expansionary
monetary policies followed by central banks across a number of
economies. Whilst some Western economies are beginning to
grow, high levels of debt will continue to act as a brake on
growth and the low interest rate environment compared to
historic norms is likely to persist in the immediate future at least.
There are, however, still several sources of macroeconomic and