Strategic report Governance Financial statements Other information RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES EVALUATING AND MANAGING RISKS CONTINUED In the Second Line of Defence, the Group Risk There is an established Model Governance 2. Principal risks As a result of this, an increasing likelihood has and Compliance functions includes teams Committee (MGC) that provides oversight to the and uncertainties been reported against the performance of focused on prevention of money laundering, application of a statistical modelling approach markets, people and financial crime principal prevention and detection of fraud and data when assessing the Group’s Pillar II Operational The Board has carried out a robust assessment risks. Operational delivery was considered to protection, Operational and Investment risk Risk capital. External validation of the approach of the emerging risks and principal risks facing the be stable after assessing the performance of oversight teams. has been commissioned through a third party to Group, including those that would threaten its existing, additional and ongoing revisions to Individual Capital Adequacy further support. business model, future performance, solvency processes and controls. Assessment Process or liquidity. Regulatory and Legal Compliance risk The primary purpose of the ICAAP is to ensure Response to the COVID-19 pandemic In making its assessment, the Board considered is recognised as increasing reflecting the that there is a clear, accurate and transparent link In March 2020, the Executive Committee the likelihood of each risk materialising in the pressure on the organisation of COVID-19, between the risk profile of the business and the established formal governance to manage the short and longer term. The Board considered the increasing client activity as well as increasing capital held by the firm. The ICAAP is overseen response to the COVID-19 pandemic. The Crisis principal risks in arriving at its viability statement. regulatory demands. by the Board Risk Committee, with facilitation Management Committee (CMC) included Management and the Board regularly discuss provided by the Risk function. membership from the Executive Committee and The principal risks and uncertainties faced by the emerging risks. Key areas discussed during the The Group has an established governance the wider Leadership Group, including the Chief Group are detailed below. The principal risks are period included communications from the framework that ensures all inputs, decisions, Internal Auditor and the CRO. The response had categorised in line with the risk management regulator, potential litigation, third party services assumptions, limitations and outputs are three primary objectives: framework; strategic, operational, financial and and solutions, operational resiliency, cyber crime reviewed, challenged and approved by key investment risks. and the COVID-19 pandemic as well the governance forums including Executive and • Delivering good client outcomes; Principal risks reported here are those attracting operational requirements deemed appropriate Board Risk Committees. The Group’s annual • Maintaining our core services and a robust the greatest focus, and to which the organisation by the Board to meet the growing demands of ICAAP report is reviewed and approved by the control environment; and has the largest exposure. The principal risks key stakeholders including clients, investors and Board. The Group’s ICAAP approach is designed Safeguarding colleague wellbeing. are linked to risk appetite and KRI measures the regulator. to be appropriate given the scale, nature and • for reporting complexity of its business model. The oversight of the Group’s COVID-19 response In assessing all risks HL considers the is managed by the HLAM Management In assessing the 2020/21 changes, consideration reputational impacts of risks materialising Committee. In managing the response, the was given to the impact of COVID-19 on the and the impacts of negative publicity, public Principal Risk materials and departmental risk Group’s inherent risks after considering perception on HL’s reputation and the registers were monitored and updated. Decisions mitigating actions and controls. COVID-19 is achievement of strategic objectives. To mitigate were taken by the CMC, the HLAM Management considered to be the primary cause for the these potential impacts HL has a PR function, Committee or escalated to the Executive increasing risk profile. makes use of external advisers and has an Committee on a materiality basis. Internal Corporate Affairs Group to support the Executive Committee. 53 Hargreaves Lansdown Report and Financial Statements 2021