Creating a competitive advantage.

Creating a competitive advantage.

Understanding the risks implicit in our business and the markets in which we operate provides us with real competitive advantage.

Simon Gadd, Chief Risk Officer (photo)
“Good risk management is more than having the right policies and procedures in place. It’s how our people behave, the values that they work to and the tone set by our business leaders.”


Our risk management framework seeks to support our business ambitions, enabling us to select those risks that can give us sustainable returns and closely managing those risks that are unrewarded, and to optimise the capital that we hold so that we can deliver our strategy.


Effective risk management is integral to our business operations.

People at all levels of the organisation are engaged in the management of risk. At the group level, the Group Board sets our overall appetite for risk; our non-executive led Group Risk Committee supports the Board in determining the Group’s risk appetite and assessing the Group’s significant risk exposures; and executive director led risk committees seek to ensure risks are managed within acceptable tolerances.

We consider risk intrinsically as part of our decision making, whether pricing a product or evaluating a major transaction, assessing the impact of the decision on our risk profile and our overall risk appetite.

We encourage managers to have a positive attitude to risk and to understand the risks that are inherent in our business so that they can ensure we:

  • take advantage of business opportunities;
  • meet our business objectives;
  • control our areas of greatest risk;
  • act promptly to fix any weakness and failure in our processes; and
  • are confident that we hold the right capital for the risks to which we are exposed.

We seek to promote an environment where:

  • there’s openness and transparency in how we make decisions and manage risks;
  • significant business decisions are aligned with our strategy, our capital performance target and our expected returns, and consider the effect on our reputation and customers;
  • managers make decisions in the light of the impact on the entire Group; and
  • business managers own the risks and risk management processes associated with the activities for which they are responsible.

We know that no system of control is fail-safe and we encourage managers to report weaknesses and deficiencies as soon as they are identified.


Solvency II is targeted for regulatory implementation in early 2016. We completed a three-year programme to prepare for Solvency II in 2012, significantly enhancing our economic capital and risk framework by delivering our group internal model. Over the last 12 months we’ve actively used its output as one of our decision analysis tools to evaluate our strategic plans, set risk appetite, allocate capital and evaluate product pricing. We also use our internal model in the assessment of significant transactions.

While there are still elements of the SII rules that will need to be finalised, we believe that our focus on developing and using our internal model in the running of our business positions us well for the transition to the SII capital regime.

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