Risk Committee - Terms of reference

CONSTITUTION

The Board of Directors has established a Committee of the Board, known as the Risk Committee, with Terms of Reference as set out below.

PURPOSE

The Committee shall be accountable to the Board and shall advise the Board on risk management and shall assist the Board to foster a culture within the Group that emphasises and demonstrates the benefits of a risk-based approach to internal control and management of the Group.

The Committee's responsibility and authority covers the entire Group of companies and any joint ventures which may be entered into.

MEMBERSHIP

All members of the Committee and its Chairman shall be appointed by the Board. The Committee shall be selected from the Directors, and shall in any event comprise no fewer than three members, at least one of whom shall be a Non-Executive Director.

A quorum shall comprise three members of the Committee.

In absence of the Committee Chairman, the remaining members present shall elect one of themselves to chair the meeting.

The Committee may invite any director, executive or other person to attend any meeting(s) of the Committee as it may from time to time consider desirable to assist the Committee in the fulfilment of its duties.

The Company Secretary or their nominee shall act as the Secretary of the Committee.

Application for representation from the Group’s external auditors may be made at anytime and duly authorised by the Committee Chairman.

MEETINGS

The Committee shall meet as and when appropriate but not less than four times a year.

The Chairman of the Committee may call additional meetings to consider such matters related to its responsibilities as the Committee may consider desirable.

AUTHORITY

The Board authorises the Risk Committee to:

  • investigate any matter within its Terms of Reference and make any recommendations which it deems appropriate on any area within its remit where action or improvement is needed;
  • ensure that an appropriate liaison is maintained with the Executive Committee (ExCo) and the Risk function and, in the ordinary course of events, each meeting will review reports from Treasury, Credit, Commercial Finance and Group Risk covering matters that have been previously considered by ExCo;
  • operate at the strategic/policy level of the business;
  • seek any information it requires from any director or employee of the Company and the Board directs that all directors and all employees co-operate with any requests made by the Committee; and
  • obtain at the Company's expense appropriate external professional advice, through the Company Secretary, and if necessary invite external advisers with relevant experience to attend meetings of the Committee.

DUTIES

The Committee in carrying out its duties under these Terms of Reference, shall:

Have regard to regulatory obligations applicable to the Company including FSA Guidance Notes, and where practicable, the Combined Code and any other relevant corporate governance codes and in this regard will liaise with the Audit Committee as necessary in respect of these matters.

Reinforce Management's control consciousness and make appropriate recommendations to the Board on all significant matters relating to the Company's risk strategy and policies.

Monitor the performance of the Basle credit rating systems through ExCo review of reports prepared by the Basle Governance groups.

Keep under review the effectiveness of the Company's risk management infrastructure. This will include:

  • an assessment of risk management procedures (for the identification, measurement and control of key risk exposures) in accordance with changes in the operating environment;
  • where appropriate, consideration of Risk audit reports on the key business areas to assess the level of business risk exposure;
  • consideration of any major findings of the Financial Services Authority and internal/external audit's risk management reviews and Management's response; and
  • an assessment of the risks of new ventures and other strategic initiatives.

Review the Company's credit risk, interest rate risk, liquidity risk and operational risk exposures in relation to the Board's risk appetite and the Company's capital adequacy.

Consider the development of Group Risk Management and make appropriate recommendations to the Board.

Consider information that is presented with financial statements relating to risk management policies and key risk exposures is in accordance with the statutory requirements and financial reporting standards.

Other

The Committee may form sub committees from its membership to address specific aspects of its duties.

The Committee shall consider any other matters requested by the Board from time to time.

The Committee may delegate such of its powers as it thinks necessary to designated individuals to assist them in carrying out work required by the Committee.

REVIEW

The Committee will conduct an annual review of its performance, and ensure that it is provided with sufficient resources to undertake its duties, and that sufficient training is provided to members on appointment and on an ongoing basis, and recommend any changes it considers necessary to the Board for approval.

These Terms of Reference will be reviewed and, where necessary updated, at least once a year.

REPORTING PROCEDURES

The Chairman of the Committee shall be responsible for reporting to the Board. The minutes of all meetings and resolutions of the Committee shall be circulated to the members of the Committee and to the Board. The Secretary will retain copies of the minutes and papers.

The Chairman of the Committee or another of its members will be available at the Company's Annual General Meeting to answer questions on matters falling within the Committee's remit.

© Northern Rock plc 2012