IBRC annual report for 2011 - Irish Bank Resolution Corporation ...

Irish Bank Resolution Corporation LimitedAnnual Report & Accounts 2011Reputational riskReputational risk is the risk of an adverse perception of the Group on the part of any stakeholder arising from an event ortransaction of, or related to, the Group. The rebranding of the corporate identity to IBRC on 17 October 2011 has reinforcedthe distinction between the current and former leadership teams. The Bank carries reputational risk in relation to its currentactivities. These relate to the effectiveness and efficiency with which it is meeting its objectives, including compliance with itslegal and regulatory obligations during a sustained period of restructuring and reorganisation. The Bank is vigilant in rebuildingconfidence and trust with all its stakeholders.Directors and employees are made aware of the role they have in rebuilding the Bank’s reputation, and of their responsibilitiesand duties from a customer service, regulatory and ethical perspective. In addition, independent control functions includingGroup Compliance, Company Secretarial, Group Finance, Group Risk and Group Internal Audit are resourced with appropriatelyexperienced and qualified teams.Legal riskThe Bank has an independent Legal Department reporting directly to the Group Chief Executive. The Bank is continuing todevelop this department to ensure that best practice in corporate governance and strict legal compliance is rigorously adheredto and for the purpose of mitigating legal risk and legal costs at all levels and across all divisions of the Bank’s business andoperations in support of an orderly wind-down of the Bank’s business and operations and achievement of maximum recoveryin the interests of the Bank, the Shareholder, and the taxpayer.In addition to the ongoing legal risk mitigation in assisting on strategic Bank initiatives and dealing with legal queries of avaried nature across the Bank on a day to day basis, it is sought to increasingly develop the resource capacity of the legalfunction to (i) ensure legal input to internal processes and procedures both at a strategic and practical level on a proactive andconsistent basis; (ii) ensure an awareness and translation of relevant legislation into the Bank’s business; and (iii) promoteeducation and training on relevant legal matters in conjunction with both the Bank’s internal and external legal advisers.Legal risk arises generally from the potential for loss resulting from adverse claims (whether or not resulting in litigation),unenforceable or defective documents resulting in a transaction not having the intended legal effect, deficient corporategovernance and internal procedures, change of law, particularly, the risk of misinterpretation and a lack of awareness ofapplicable legislation, all of which can disrupt or otherwise negatively affect the operations, condition or financial orreputational standing of the Group.The legal risk of adverse claims is currently monitored through a Group-wide litigation register maintained by the LegalDepartment with the oversight of the Risk and Compliance Committee. This facilitates the assessment of potential losses, whichcould arise from adverse claims, and identification of trends and recurrence with a view to preventing same by addressingweaknesses giving rise to such claims. Frequent engagement with the relevant business divisions and external legal advisorsacting on potentially contentious Bank matters further assists in earlier awareness at Group level of potential adverse claimsand identification of matters requiring concentrated and specific strategic input and management time and resources.Separately, the Legal Department plays a central role in the management of legal matters relating to certain legacy issues whichpreviously arose in the Bank and the co-operative progression of the investigations initiated by relevant authorities in the periodsince December 2008.Conduct riskConduct risk is the risk posed to customers from the Bank’s direct interaction with them, and the risk of inadequate internalreporting of non-performing or poorly performing loans to management committees and boards and external disclosures ofcredit risk exposure and impairment provisions.The scope of the Bank’s work in relation to customers is now to ensure adherence to a high standard of customer care duringthe loan resolution phase whilst maintaining strong internal reporting and timely accurate external reporting of exposures andprovisions. The Bank is focussed on ensuring the fair treatment of the customer stakeholder group through adherence toregulatory, legal and good business practice.In relation to the risk of inadequate internal and external reporting to other stakeholders, the Bank’s focus is on ensuringadherence to robust policies and controls for the early detection, reporting, monitoring and loss risk assessment of forbearanceand customer impairment, strong management of non-performing loans, and transparent provisioning policies.131