Strategic report Governance Financial statements Other information RISK COMMITTEE REPORT CONTINUED Risk management framework The Committee has reviewed and challenged reports submitted Risk maturity and enhancements to the framework In conjunction with the Audit Committee, the Committee has to the Committee for evidence of continued evolution of risk Following completion of the external assessment of the Group’s responsibility for reviewing the effectiveness of the Group’s management in the first line, including reports on the Group’s risk maturity and risk management framework in September 2020 internal controls and risk management framework. This includes response to COVID-19, other resilience events and exposures and in line with the Group’s desire for strong and robust risk advising the Board on the Group’s overall risk appetite, overseeing relevant to a specific legal entity, e.g. the risks of partner bank management, the Committee has been reviewing the capabilities the management of risk within the Group’s business and failure to HL Savings Limited. of the Group’s second line to ensure that it is designed in monitoring progress on improvements being made across its The Committee has also received assurance on risk management proportion with the size, complexity and activities of the Group. risk management framework. within the Group’s business lines and activities via updates to the In light of this review, and as highlighted in my introduction, the Risk appetite risk profile from the Group’s second line Risk function and papers Committee oversaw the appointment of a GCRO in January 2021 A key element of the Group’s risk management framework is its risk relating to the COVID-19 control environment. and approved increased resource capacity in the second line. appetite framework, which defines, by reference to the Group’s The Committee has been working closely with the GCRO to agree principal risks, the acceptable levels of risk that Executive During the period under review, the Committee also reviewed the the next phase for the Risk Enhancement Plan for the Group. management are permitted to take in order to achieve the Group’s twice yearly self-assessment from the Chief Executive Officer on Areas of particular focus for improvement include: strategic goals and objectives. the Group’s risk management framework and reports from the Improving the use of risk data and reporting in the Group’s GCRO on the self-assessment process and the level of assurance • The Committee reviews the Group’s risk appetite at least annually. it provides. decision-making; During the period under review, the Committee reviewed and MLRO updates •Introduction of an enhanced risk taxonomy, supporting challenged proposed enhancements to the Group’s risk appetite The Committee receives and reviews periodic reports from the improved aggregation and escalation of risk; approach. Improvements included linking the risk appetite to MLRO specifically addressing the adequacy and effectiveness Continued evolution of the Group’s governance structures stress testing and capital scenario assessments performed as part • of the ICAAP. of the Group’s anti-money laundering and counter terrorist to support improved risk management and management financing systems and controls as well as the prevention of bribery. decision making; After careful review the Committee approved revisions to the During the period, the Committee considered and supported a Enhanced specialist capabilities both in the first and second line Group’s risk appetite statements and the risk appetite framework programme designed to review the Group’s anti-money laundering • in January noting that they would be reviewed in full by the Group and counter terrorist financing systems and controls and identify with respect to risk management; and Chief Risk Officer (GCRO) later in the year. In June the Committee areas for enhancement to enable the Group to continue to comply •Improving the use of more forward-looking risk information considered the Group’s risk appetite and plans for its development with the legislative requirements and to efficiently and effectively to allow for more proactive management of risk. and the Board approved the continued use of the existing Group risk manage the increasing client volumes. It is anticipated that the In June, the Committee received and approved the detailed appetite statements whilst those developments were progressed. enhancement areas will involve improving automation and annual reports from the GCRO on the adequacy and operating Embedding risk management capability. The Committee also reviewed and approved updates effectiveness of risk management, the internal control In carrying out its responsibilities in respect of the Group’s wider to the Group’s Anti-Bribery & Corruption Policy . environment, and risk embedding across the Group. The risk management framework, the Committee has overseen and Committee has subsequently reviewed and approved the supported the continuing strengthening of risk management disclosures and statements in the Report and Financial responsibilities in the operational teams in the first line, to enable Statements relating to risk management. Whilst the Committee the Group’s Risk function to further focus on second line activities. acknowledges that further work is needed to develop the Group’s risk management framework, it is satisfied that the effectiveness of the Group’s risk management activities continues to improve. 123 Hargreaves Lansdown Report and Financial Statements 2021