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Risk management
Nedbank Group embraces effective risk management as a core competency – one that allows for optimised risk-taking, is objective and transparent and ensures that the business prices for risk appropriately, linking it to return.
One of the main catalysts to attaining our Deep Green aspiration to be ‘worldclass at managing risk’ is our successful implementation of Basel II. The Basel II framework describes a minimum international standard for capital adequacy that national supervisory authorities implement through domestic rule-making and adoption procedures. This was done in South Africa in January 2008 when the South Africa Reserve Bank introduced new Basel II banking regulations. As a result of the incorporation of Basel II into our business processes, Nedbank has enhanced the level of sophistication of its risk and capital measurement and management and more closely aligns its regulatory and economic capital to the risks that the bank faces.
Nedbank Group continues to be well-capitalised, but with a significantly increased Tier 1 capital adequacy ratio of 9,6% (December 2007: 8,2% pro forma Basel II) and a total capital adequacy ratio of 12,4%. On the back of the global financial crisis the group now holds additional surplus capital and has also extended its target regulatory capital ranges while including a new target capital adequacy range for core Tier 1 capital. Nedbank has cultivated and embedded a prudent and conservative risk appetite, focused on the basics and core activities of banking.
The effective and appropriate management of such risks is put into practice through the Group’s best-practice Enterprise-wide Risk Management Framework, which considers both the risks the group faces today and those it may face in the future. The Enterprise-wide Risk Management Framework comprises the following three lines of defence:
- The first line of defence comprises focused and informed involvement by the board and Nedbank Group Executive Committee (Group Exco), and accountability and responsibility of business management – all supported by appropriate internal control, risk management and governance structures, policies and processes.
- The second line of defence consists of independent risk monitoring and oversight at group level by Group Risk and Enterprise Governance and Compliance.
- The third line of defence provides independent objective assurance on the management of risk across the group. This is given by internal and external audit.
The board acknowledges its responsibility for the entire process of risk management and for evaluating the effectiveness of this process. Management is accountable to the board for designing, implementing and monitoring the process of risk management and integrating it with the day-to-day activities of the group. The Group Risk and Capital Management Committee is the board committee responsible for assisting the board in reviewing the risk management process and any significant risks facing the group.
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