Principal risks and risk management
The Group faces a range of risks and uncertainties which could materially affect the achievement of its strategic objectives and, in turn, its financial performance.
Below we describe our approach to risk management, and the process and governance framework that we have in place to identify, assess, manage and monitor risks.
Approach to risk management
The Board is responsible for setting the overall strategic direction of the Group. As part of the strategic decision making process, the Board seeks to achieve an appropriate balance between taking risk and generating returns for our shareholders. The evaluation of strategic choices and new opportunities requires a detailed risk assessment, which takes into account the Board’s overall risk appetite.
The Group’s risk management framework is designed to support the delivery of the strategic objectives determined by the Board. This framework includes the periodic assessment of changes and developments which potentially impact the Group’s overall risk profile, as well as the identification and assessment of key risks and the review of the effectiveness of the risk mitigation plans which have been put in place.
Risk management framework and governance structure
3i’s risk management framework and associated governance structure are designed to ensure that there is an effective process and a clear organisational structure with well defined responsibilities to identify, assess, manage and monitor risk and operate at a number of levels throughout the Group.
The Board is responsible for overall risk management, which includes the Group’s risk governance or oversight structure, and for maintaining an appropriate internal control framework.
Responsibility for oversight of risk management is delegated to the Chief Executive who has established the Group Risk Committee to assist him to discharge this responsibility. They are guided by the Board’s appetite for risk and any specific limits set. The Group Risk Committee maintains the Group risk review, which summarises the Group’s principal risks and associated mitigating actions.
The Audit and Compliance Committee is updated by the Chief Executive, as Chairman of the Group Risk Committee, at each meeting on the outputs of the latest Group Risk Committee meeting and has the opportunity to contribute views or raise questions.
The outputs of the latest Group Risk Committee meeting are also considered by the Board as a whole, with a particular focus on the potential impact on the setting and execution of the Group’s strategy.
The Group’s reporting cycle and dates of key meetings are co-ordinated to ensure that appropriate risk and strategic reviews are performed in alignment with the scheduled Board and Audit and Compliance Committee meetings. The Group Risk Committee typically reviews risks over a rolling 12-month time horizon. Longer-term risks are considered by the Board, as part of its annual strategic review, and then reflected in the Group risk review.
In addition to the above, a number of other committees contribute to the Group’s overall risk governance structure.
The Investment Committee meets as required to consider risk in relation to the acquisition, management and disposal of investments, within the authority limits delegated by the Board.
The Conflicts Committee reviews the Group’s conflict policies and processes and meets periodically and as required to review any specific issues which may arise.
The Treasury Transactions Committee provides formal approval for specific treasury related transactions, taking into consideration any risk management implications, subject to specific limits or delegated authority from the Board.
The Group’s Brand and Values Committee considers risks which could potentially impact the Group’s brand and reputation, drawing upon the outputs of the Group’s risk review.