Whet Your Risk Appetite – What Boards Need To Know Abacus Conference 24 th September Whet Your Risk Appetite - What Boards Need To Know 1

Background World change Regulation and regulatory oversight Recent experience: JP Morgan Barclays HSBC Lend Lease Macquarie Bank Role of Director needs to evolve, but ‘how’? Whet Your Risk Appetite - What Boards Need To Know 2

My aim today is: Recent experience Two differing approaches Culture Conclusions Whet Your Risk Appetite - What Boards Need To Know 3

Recent Experience Expected losses Unexpected losses Whet Your Risk Appetite - What Boards Need To Know 4

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Writings on Loss Management COSO Enterprise Risk Management A natural consequence of taking risk Whet Your Risk Appetite - What Boards Need To Know 7

Two Different Approaches Compliance Approach: Tick the boxes Judgment Approach: Experienced people Culture Reward & motivation Whet Your Risk Appetite - What Boards Need To Know 8 Three Lines of Defence

Organisation Culture Binds people to a common mission and objectives Binds people to adherence to common values, ethics and behaviours Whole of organisation culture, not risk culture Centrality of Boards Board oversight Whet Your Risk Appetite - What Boards Need To Know 9

Questions for Directors Strategy and risk appetite Reporting of the business results Test embedding Remuneration Whet Your Risk Appetite - What Boards Need To Know 10

Directors Approach Up to date Dumb questions Pursue Ask what could go wrong Data vs information Whet Your Risk Appetite - What Boards Need To Know 11

Gaps Data v judgement Process v experience Risk v reward Fear v greed Compliance v intuition People v process Independence v collaboration Whet Your Risk Appetite - What Boards Need To Know 12

Strategic Issues for the Mutual Sector Unexpected losses in the US Where to grow What can go wrong? Whet Your Risk Appetite - What Boards Need To Know 13

Whet Your Risk Appetite - What Boards Need To Know 14 Our People: Bruce Auty – Principal Michael Hamar – Principal Andrew Williamson – Director Bruce Hills – Director Peter Ewers – Risk Consultant