NEDBANK CAPITAl - Nedbank Group Limited

OVERVIEWAs the Chief Risk Officer of the groupPhilip heads the Group Risk function,ensuring that risk is embedded andembraced throughout the organisation,thus providing assurance that the bankis well-managed. Policy setting, riskframeworks, governance structures androbust risk reporting all contribute toachieving Nedbank Group’s aspiration ofworldclass risk management.Review of the past yearDespite unprecedented global volatility,the SA banking industry has remainedstructurally sound. Although banks haveexperienced cyclical financial stressas a result of the economic downturn,Nedbank Group has proven resilience.Risk management, more than everbefore, has become a focal point toavert risk exposure and to manageand sustain business better. With thisrealisation the important role that riskmanagement has to play is reinforced.In response to the economic instabilitymanagement significantly reducedthe risk profile of the group to ensuresustainability and increased proactiverisk management. This resulted in tightercredit lending criteria within the Retailand Business Banking sector of thebusiness, more stringent risk acceptancecriteria, stronger emphasis on improvingcollections efficiency as well asincreased affordability buffers. Similarly,the strategy for the Nedbank Corporatecluster included active management ofclients with large exposures, tighteningof controls on international trade andtransactions, and a review of high-riskindustries to identify specific areas ofstress so as to develop early warningsignals and prompt proactive clientengagement in affected industries. Inaddition, stress testing on share-basedexposures in order to manage securitylevels formed part of this deriskingstrategy.As testament to Nedbank Group’seffective risk management programmethe group was recognised at the recentInstitute of Risk Management SouthAfrica awards as a runnerup for the mosteffective risk management programmefor 2009, having been the winner in theprevious two years.OutlookThrough the annual strategic businessplanning exercise Group Risk identifiedeight focus areas for the year ahead asaligned with the strategic focus areas forNedbank Group:• Manage for value through the cycle– This will be achieved through acontinued focus on sound capital andliquidity management and managingcredit through the challenging creditcycle.• Step change in non-interest revenuegrowth – During this period wherebusiness is required to focus onincreased innovation to achievegrowth of non-interest revenuesound risk principles will be strictlymaintained.• Become client-driven – As anenabler to business, one of theongoing objectives of the centralrisk function is to embrace new andexisting legislation and internaliseand operationalise regulationsin the course of normal businessoperations. During this processmaintaining strong relationships withkey stakeholders, including the board,regulators and shareholders, is ofparamount importance in preservingthe reputation of Nedbank Group.• Manage risk as an enabler –Improving on forward-looking analysiswill ensure that the group is wellpositionedproactively to identifyand manage risks within the ongoinguncertain and volatile environment.• Enhance productivity and execution– Business process engineering will beinitiated to identify early recognitionof potential threats with the aim ofimplementing new and appropriatecontrols further to enhance thestrategy of proactive and dynamic riskmanagement.• Maintain strong risk managementculture for competitive advantage– Maintaining a strong oversightof the group’s EnterprisewideRisk Management Framework willcontinue to place a strong emphasison accountability for managing thegroup’s identified risk universe.• Accelerate transformation –Managing transformation risk, whichforms part of the Nedbank Grouprisk universe, remains an area ofpriority in developing a black talentpipeline to meet future growthrequirements and ensuring thatNedbank Group contributes positivelyto the wider context of South Africa’stransformation.• Lead as a corporate citizen – Allbusiness undertakings will continueto be aligned with Nedbank Group’sposition to remain a leader incorporate social responsibility anduphold the ‘green’ risk managementstrategy.The detailed Risk and Balance SheetManagement Report follows onpages 126 to 187.GROUP REPORTSOPERATIONAL REVIEWSGOVERNANCE125NEDBANK GROUP ANNUAL REPORT 2009