Strategic report Governance Financial statements Other information RISK COMMITTEE REPORT CONTINUED Risk exposures and reporting Governance framework improvements ICAAP The Committee is responsible for overseeing and advising In 2019 and 2020 the Group implemented a programme of An important aspect of the Committee’s role is its annual review the Board on the Group’s current risk exposures and future improvements to the Group’s governance framework and during and challenge of updates to the Group’s ICAAP. The 2020 ICAAP risk strategy. the period under review, the Committee has received regular was a dominant feature of the Committee’s agenda in the first The Committee receives regular updates from the GCRO on the updates on progress made embedding and evidencing those half of the period under review, with the final output approved by principal and emerging risks facing the Group. During the period improvements. the Board on the Committee’s recommendation in December. under review, the Committee considered, in particular, risks to the System outages and improvements to operational resilience Separate agenda items were dedicated to the constituent parts Group associated with cyber-security, financial crime, the COVID-19 During the period under review the Group experienced one brief of the ICAAP, including the review of capital and liquidity response, partner bank failures and operational resilience. period of total outage of the Group’s platform and two brief requirements, operational risk scenarios, stress testing and the periods of partial outage in relation to specific functionalities within wind down plan. The risk function provides regular updates to the Committee on the the Group’s overseas trading systems which have now been The Committee’s consideration of the Group’s 2020 ICAAP status of the Group’s risk profile. The assessments are supported upgraded. The brief period of total outage of the Group’s platform included a detailed review of the scenarios used for the Pillar 2 by reference to the Board approved risk appetite, reviews of risk and arose as a result of procedural failures leading to the exposure of an operational risk scenarios, the severity of the stress tests and the compliance events and status of control effectiveness. underlying technical issue on the same day as the announcement improvements made following the external validation work carried Specific matters or risk events are escalated to the Committee that an effective vaccine for COVID-19 had been discovered. This out on the Group’s Pillar 2 2019 ICAAP modelling. The Committee in accordance with the risk appetite statements and, during the was managed swiftly by our technical teams with lessons being provided feedback and challenge to year-on-year movements and period under review, the Committee has reviewed and opined on identified and actions taken forward to minimise the risk of issues the impact of materialised risk events which occurred during the the various matters escalated to it. This has included resiliency of this type in the future. period on the scenarios. The Committee also reviewed and events following spikes in demand, for example in November 2020 The Group’s overseas share trading operation encountered challenged the model assumptions and testing that underpin the as a result of the announcement of a vaccine for COVID-19. difficulties due to unusually high trading volumes as a result of a Pillar 2 capital adequacy calculations. Following the notification of a risk event, the Committee reviews technical weakness which was rapidly identified and remedied. Oversight of Risk function the outputs from business root cause analysis and oversees the The Committee has been heavily involved in reviewing the Group’s The Group’s second line Risk function is an integral part of its wider recommendations from management for future improvement to operational resilience and ensuring that lessons have been risk management framework. The Committee is responsible for the Group’s risk management systems. identified and actions taken forward to minimise the risk of future approving its remit and ensuring it has adequate resources and COVID-19 pandemic events and maintain client service. In addition, the Committee has appropriate access to information to enable it to perform its duties During the period under review, theCommittee continued to reviewed the approach to drive necessary enhancements relating effectively. During the period under review, the Committee oversee management’s response to the COVID-19 pandemic, to the recently published FCA Policy statement regarding reviewed and approved changes to the Group’s second line including the potential impacts resulting from COVID-19 fatigue operational resiliency expectations. Further oversight will continue Risk Charter, Operating Cycle and the Group Risk Policy. The amongst colleagues and the increased demand placed on the through the upcoming period including the approval of operational Committee also received regular updates from the GCRO on Group’s platform as a result of client behaviour changing during resiliency thresholds as set out in Policy guidance. resourcing and workload, and received a detailed report on the the COVID-19 pandemic. operational effectiveness of the function at its June meeting. 124 Hargreaves Lansdown Report and Financial Statements 2021