Group Risk Committee Report.




Nick Prettejohn

Committee member since 2 November 2010, Chair since 6 April 2011

Dame Clara Furse

Committee member since 14 April 2010

Henry Staunton

Committee member since 14 April 2010

Stuart Popham

Committee member since 1 July 2011

“The Committee’s role is to provide guidance to the Board in relation to the Group’s risk management policies and procedures, and to provide advice on what constitutes acceptable risk taking.”

Other attendees at Committee meetings include: the Group Chairman, Group Chief Executive, Group Chief Risk Officer, Group Chief Internal Auditor and representatives of the external auditor, PricewaterhouseCoopers LLP.

All members of the Committee are independent non-executive directors. The Board reviewed the composition of the Committee during 2012 and concluded that the composition is appropriate and that Committee members have the knowledge and skills to effectively fulfil their responsibilities.

The Committee met seven times during 2012. The Committee’s terms of reference are reviewed annually and the current terms of reference reviewed in November 2012 are available on our website. The terms of reference expressly confirm that the Committee’s remit covers the full spectrum of major risks facing the business of the Group, including operational and conduct risk.

The Chairman of the Committee reports back to the Board on the outcome of meetings, and the Board receives the minutes of all Committee meetings.


The Group’s approach to the management of risk is explained in detail in the Risk management section. The Committee’s role is to provide guidance to the Board in relation to the Group’s risk management policies and procedures, and to provide advice on what constitutes acceptable risk taking. The Committee provides input on and assistance to the Board in the formulation and definition of the Group’s Risk Appetite statements. The Committee is assisted by the work of the Group Chief Risk Officer who reports, and has unfettered access, to the Committee. The Committee must approve the appointment or removal of the Group Chief Risk Officer.

Risk management review

During 2012, the Board commissioned an externally facilitated review to assess the Group’s risk management framework against industry best practice in readiness for Solvency II. The review has been overseen by the Committee and has been a major focus during 2012. KPMG were appointed to facilitate the review. The Committee considered the findings of the review and is overseeing the implementation of a target operating model designed in response to the review recommendations to meet the needs of the Group’s future strategy.

Risk appetite statements

An additional major focus of the Committee during 2012 has been the review of risk appetite and the Group’s risk-based capital requirements, committing an entire meeting in July to debating these topics, alongside consideration of the profile of strategic and emerging risks to the Group.

Solvency II internal model submission

The Group’s application to the FSA for approval to use a partial internal model to calculate the Group’s solvency capital requirement under Solvency II was submitted in November 2012. The Committee reviewed the application before it was submitted to the Board for final approval.

Focused business reviews

A cycle of focused business reviews during the course of 2012 has enabled the Committee to undertake ‘deep dives’ into the risk profiles of core business lines through discussion with the relevant managing directors. Key reviews during the year included:

  • Legal & General Investments, the Group’s collective investment schemes business.
  • Workplace Savings.
  • General Insurance business.

Additionally, as part of a cycle of risk management reviews, the Committee has considered the frameworks in place across the Group for the management of:

  • Insurance risk.
  • Market and credit risk.
  • Customer and conduct risk.

Group Chief Risk Officer’s regular report

The Group Chief Risk Officer provides a detailed report to the Committee at each meeting. Each report highlights key matters in the environments in which the Group is operating, the risks that these may present and potential mitigation. Areas considered include global, eurozone and UK economic conditions and the political and regulatory environment. The report also focuses on specific company risks and issues and emerging risks, the nature of the risks and how they may have changed. The report provides the Committee with an opportunity to debate key issues and review mitigating actions.


The Chairman of the Audit Committee is a member of the Group Risk Committee. The areas of responsibility of each of the Audit Committee and the Group Risk Committee are defined. The Group Risk Committee provides guidance to the Board on risk management policies and procedures and what constitutes acceptable risk taking, while the Audit Committee looks at the adequacy and effectiveness of the internal control framework encapsulated within those policies and procedures, including financial control. There is active consideration of areas of potential overlap between the Committees and where it would be helpful for an issue considered by one committee to also be considered by the other. The Audit Committee receives input from the Group Risk Committee in the preparation of the internal audit programme and external audit plan.