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

Corporate governance statement continued• Commissioning and reviewing reports on key riskissues;• Review and oversight of management’s plans formitigation of the material risks faced by the variousbusiness units of the Group; and• Oversight of the implementation and review of riskmanagement and internal compliance and controlsystems throughout the Group.The Group Risk function provides a risk report to each meetingof the Committee which addresses the material risk types towhich the Group has exposure including credit, liquidity andmarket risk. The Group Compliance function also provides areport to the Committee’s meetings which addresses allmaterial compliance matters. In addition, the Group Legalfunction provides a regular review on all material litigationmatters involving the Bank. The Committee also receivesupdates from various Heads of Business functions on a regularbasis to enhance its understanding of the risks facing thosedifferent business units and the actions being taken to managethose risks.At the invitation of the Committee, there are a number ofadditional standing attendees at each meeting including theChief Financial Officer, Chief Risk Officer and the Head ofGroup Internal Audit.Nomination and Governance CommitteeMembers at 31 December 2011:Aidan Eames (Chairman), Mike Aynsley, Dr. Noel Cawley,Alan Dukes, Maurice Keane and Gary Kennedy.The Nomination and Governance Committee is responsible for:• Leading the process for appointments and renewalsto the Board and Board sub-committees andreviewing senior management succession plans,making recommendations to the Board, asappropriate;• Overseeing the process for appointments andrenewals of the Boards of subsidiary entities,including regulated subsidiaries; and• Monitoring developments in corporate governance,assessing the implications for the Bank, overseeingadherence by the Bank and its group of companiesto applicable governance requirements and advisingthe Board accordingly.Internal controlThe Directors acknowledge their overall responsibility for theGroup's system of internal control and for reviewing itseffectiveness, including having an appropriate process in placefor the preparation of Group Accounts. The Board hasdelegated to the Group Executive Committee the planning andimplementation of the system of internal control within anappropriate established framework which applies across theGroup. The system is designed to manage rather thaneliminate the risk of failure to achieve the Group's businessobjectives and provides reasonable but not absolute assuranceagainst material financial misstatement or loss. Such lossescould arise due to the nature of the Group's business inundertaking a wide range of financial services that inherentlyinvolve varying degrees of risk.The Group's system of internal control includes:• An organisation structure with clearly definedauthority limits and reporting mechanisms to seniorlevels of management and to the Board;• Divisional managers who, in conjunction with theGroup Risk and the Group Compliance functions,have responsibility for ensuring that risks areidentified, assessed and managed throughout theGroup. The Group Risk function together with theGroup Asset and Liability Committee providessupport to the Audit Committee and the Risk andCompliance Committee;• An independent Group Finance function, under theleadership of the Chief Financial Officer, which hasresponsibility for managing the process in respect ofthe preparation of group accounts, having regard toapplicable regulatory, legislative and financialaccounting requirements;• An annual budgeting and monthly financialreporting system for all Group business units whichenables progress against plans to be monitored,trends to be evaluated and variances to be actedupon;• A set of policies and guidelines relating to credit riskmanagement, asset and liability management(including interest, currency, and liquidity andfunding risk), compliance, operational riskmanagement, capital expenditure, computersecurity and business continuity planning; and• A Code of Conduct setting out the standardsexpected of all Directors, officers and employees ofthe Group.Procedures for monitoring the effectiveness of internal controlsinclude internal audit reports which are considered by theAudit Committee with an overview report provided by theHead of Internal Audit to meetings of the Committee,reporting by Group Risk and Group Compliance to the Risk andCompliance Committee meetings, and an annual assessmentby the Board of the effectiveness of internal controls.The Head of Group Internal Audit reports directly to theChairman of the Audit Committee and administratively to theGroup Chief Executive. The system of internal control isreviewed by Group Internal Audit. Emphasis is focused onareas of greatest risk as identified by risk analysis. The internalcontrol systems are subject to regulatory supervision by theCentral Bank of Ireland and overseas regulators.The Board confirms that there is a framework in place (which isdescribed in note 50) for identifying, evaluating and managingthe significant risks faced by the Group including compliancewith relevant law and regulation. This framework is regularlyreviewed and is in accordance with the Financial ReportingCouncil Revised Guidance on Internal Control (’the Turnbullguidance’).28