As the Chief Risk Officer of the group Philip heads the Group Risk function, ensuring that risk is embedded and embraced throughout the organisation, thus providing assurance that the bank is well-managed. Policy setting, risk frameworks, governance structures and robust risk reporting all contribute to achieving Nedbank Group’s aspiration of worldclass risk management.

Review of the past year

Despite unprecedented global volatility, the SA banking industry has remained structurally sound. Although banks have experienced cyclical financial stress as a result of the economic downturn, Nedbank Group has proven resilience. Risk management, more than ever before, has become a focal point to avert risk exposure and to manage and sustain business better. With this realisation the important role that risk management has to play is reinforced.

In response to the economic instability management significantly reduced the risk profile of the group to ensure sustainability and increased proactive risk management. This resulted in tighter credit lending criteria within the Retail and Business Banking sector of the business, more stringent risk acceptance criteria, stronger emphasis on improving collections efficiency as well as increased affordability buffers. Similarly, the strategy for the Nedbank Corporate cluster included active management of clients with large exposures, tightening of controls on international trade and transactions, and a review of high-risk industries to identify specific areas of stress so as to develop early warning signals and prompt proactive client engagement in affected industries. In addition, stress testing on share-based exposures in order to manage security levels formed part of this derisking strategy.

As testament to Nedbank Group’s effective risk management programme the group was recognised at the recent Institute of Risk Management South Africa awards as a runnerup for the most effective risk management programme for 2009, having been the winner in the previous two years.

Outlook

Through the annual strategic business planning exercise Group Risk identified eight focus areas for the year ahead as aligned with the strategic focus areas for Nedbank Group:

• Manage for value through the cycle – This will be achieved through a continued focus on sound capital and liquidity management and managing credit through the challenging credit cycle.
• Step change in non-interest revenue growth – During this period where business is required to focus on increased innovation to achieve growth of non-interest revenue sound risk principles will be strictly maintained.
• Become client-driven – As an enabler to business, one of the ongoing objectives of the central risk function is to embrace new and existing legislation and internalise and operationalise regulations in the course of normal business operations. During this process maintaining strong relationships with key stakeholders, including the board, regulators and shareholders, is of paramount importance in preserving the reputation of Nedbank Group.
• Manage risk as an enabler – Improving on forward-looking analysis will ensure that the group is wellpositioned proactively to identify and manage risks within the ongoing uncertain and volatile environment.
• Enhance productivity and execution – Business process engineering will be initiated to identify early recognition of potential threats with the aim of implementing new and appropriate controls further to enhance the strategy of proactive and dynamic risk management.
• Maintain strong risk management culture for competitive advantage – Maintaining a strong oversight of the group’s Enterprisewide Risk Management Framework will continue to place a strong emphasis on accountability for managing the group’s identified risk universe.
• Accelerate transformation – Managing transformation risk, which forms part of the Nedbank Group risk universe, remains an area of priority in developing a black talent pipeline to meet future growth requirements and ensuring that Nedbank Group contributes positively to the wider context of South Africa’s transformation.
• Lead as a corporate citizen – All business undertakings will continue to be aligned with Nedbank Group’s position to remain a leader in corporate social responsibility and uphold the ‘green’ risk management strategy.

The detailed Risk and Balance Sheet Management Report follows here.