Risk and Compliance
Managing risk is a fundamental part of banking. Triodos Bank manages risk as part of a long-term strategy of resilience.
Risk Management is embedded throughout the organisation. While business managers are primarily responsible for delivering a resilient business approach, they are supported by risk managers, with local business knowledge, to identify, assess and manage risk. At a group level, a risk appetite process is implemented to align Triodos Bank’s risk profile with the willingness to take risk in achieving its business objectives.
During this process each business unit performs a strategic risk assessment to identify and manage potential risks that could impede the realisation of their business objectives. The results of these assessments are consolidated and used as input for the Executive Board’s own risk assessment, and to determine Triodos Bank’s risk appetite. The results of these assessments are part of the business plan cycle.
The strategic risk assessment outcomes form the starting point and foundation for determining the risk appetite, the assessment of the capital and liquidity requirements in relation to the risk appetite and recovery plan in case of deviation. In addition, the local risk sensitivities were reviewed to determine scenarios that were used to stress test Triodos Bank’s solvency, liquidity and profitability during 2015. The results of these tests were satisfactory.
A fully integrated risk management report gives insights into the Triodos Bank risk profile in relation to the accepted risk appetite. The report is an important monitoring tool for Triodos Bank’s risk profile, gives insights on specific risk themes, and provides an integrated picture of risk at business unit level. This report is produced quarterly and discussed with the Supervisory Board’s Audit and Risk Committee.
The monthly Asset and Liability Committee is responsible for assessing and monitoring the risks associated with market risk, interest rate risk, liquidity risk, and currency risk and capital management.
The credit risk function plays an important role in assessing the risk of new loans and monitoring the credit risk of the entire loan portfolio.
The assessment of credit risk is as close as possible to the client, and therefore primarily the responsibility of local branches, who are responsible for daily operations. The central risk function sets norms, approves large loans and monitors the credit risk of Triodos Bank’s entire loan book.
The of Triodos Bank’s annual accounts provides a description of the main risks related to the strategy of the company. It also includes a description of the design and effectiveness of the internal risk management and control systems for the main risks during the financial year. No major deficiencies in the internal risk management and control systems were discovered in the financial year. The developments of the main risks within Triodos Bank are described in the integrated risk management report and discussed on a regular basis in the Audit and Risk Committee of the Supervisory Board.