Tullett Prebon plc Annual Report 2010
The members of the Group Treasury and Risk Committee are the Chief Executive, who acts as chairman, the Finance Director and the Group Treasurer and Head of Group Risk Control. The minutes of the Group Treasury and Risk Committee are circulated to the Board. Risk reporting The embedded risk management processes ensure that the Group Treasury and Risk Committee, executive directors and senior management receive appropriate information and exception reports to comply with the Group’s risk management principles and policies, and identify any new risks or exposures that may arise. These include reports detailing the current status of existing controls, audits, loss events, and any required action plans to remedy any identiﬁed shortcomings in the control environment. Compliance The Group’s lead regulator is the FSA. The Group’s broking subsidiaries are categorised as either Limited Activity Firms (for subsidiaries that undertake any Matched Principal or exchange traded ‘give-up’ business) or Limited Licence Firms (for subsidiaries that undertake only Name Give-Up business). The Group’s Compliance Departments monitor compliance with the various regulatory requirements to which the Group is subject, including those imposed by the UK regulatory regime and also those imposed by the regulatory framework of the other jurisdictions in which the Group operates. The compliance ofﬁcers are in regular contact with the executive directors and compliance reports are made to the Board on a regular basis. Internal audit PricewaterhouseCoopers were appointed to act as the Group’s internal auditor in December 2007, following an extensive review of internal audit arrangements by the Audit Committee. The objectives of Internal Audit are to assess the effectiveness of the Group’s risk management, internal controls and governance process; whether operational and ﬁnancial controls are appropriate and consistently applied; the effectiveness of internal controls for the safeguarding of assets; the reliability and integrity of management information; and the adequacy of processes to ensure compliance with applicable laws and regulations.
Internal Audit work during 2010 covered the full ‘audit universe’ within the Group at different levels of intensity based upon the results of a risk assessment exercise carried out and agreed with the Audit Committee in December 2009. The work included site visits and meetings with senior management, both at Group level and in each of the geographic regions in which Tullett Prebon operates. The ﬁndings of all audits undertaken are reported to the Audit Committee and, where appropriate, action taken by management in response to them is tracked and reported to the Audit Committee. The Audit Committee approved the internal audit plan for 2011 at its December 2010 meeting. Business initiative management process The Business Initiative Proposal (‘BIP’) process is a core risk mitigation process used throughout the Group to identify, assess and manage the potential risks arising in relation to any new business initiative and the potential impact the new business could have on Tullett Prebon’s capital resources and liquidity resources. A BIP proposal must be submitted for all signiﬁcant business changes, whether this is the introduction of a new product or business line, or a material modiﬁcation to an existing business line. Each BIP requires authorisation by the appropriate member of senior management.
Group risk proﬁle
The Group’s Risk Assessment Framework categorises the risks facing the Group into eight categories: Market Risk, Credit Risk, Operational Risk, Strategic and Business Risk, Governance Risk, Regulatory, Legal and HR Risk, Reputational Risk and Financial Risk. All risk management sections are unaudited except those relating to market risk, credit risk and ﬁnancial risk, which form part of the Group’s IFRS 7 ‘Financial Instruments: Disclosures’. 1. Market risk Market risk is the vulnerability of the Group to movements in the value of ﬁnancial instruments. The Group does not take trading risk and does not hold proprietary ﬁnancial positions. Consequently, the Group is exposed to market risk only in relation to incidental positions in ﬁnancial instruments arising as a result of the Group’s failure to match clients’ orders precisely. Such positions are valued and measured from trade date on a daily mark-to-market basis.