31 MARCH 2015ALEXANDER FORBES GROUP HOLDINGS LIMITEDINTEGRATED ANNUAL REPORT

KEY RISK MANAGEMENT HIGHLIGHTS AND DEVELOPMENTS IN THE YEAR under review

The board and management recognise that the ongoing and effective management of business risks is vital to the group’s continued growth and success. This requires us to target, on an annual basis, very specific risk management initiatives and projects which assist the group in maintaining its position within the market.

Key achievements in the 2014/15 financial year were as follows:

  1. The Financial Services Board (FSB), during the 2014/15 year, issued many directives concerning the implementation of Solvency Assessment and Management (SAM). The group has responded by ensuring that the following were completed within the required timeframes:
    • Substantially completed and operationalised SAM capital adequacy requirements in line with pillar 1 requirements.
    • Ensured the successful implementation of Board Notice 158 – Governance and Risk Management Framework for Insurers. This framework requires an insurer to adopt, implement and document an effective governance framework that provides for the prudent management and oversight of its insurance business and that adequately protects the interests of policyholders. A significant subset of our implementation of Board Notice 158 was the enhancement of the group’s three lines of defence governance model to ensure that all statutory governance requirements are met, with special focus on a strong sense of accountability, responsibility, independence, reporting, communication and transparency, both internally and with all key external stakeholders.
    • Completed implementation of the standardised approach for operational risk, which assures the regulator that adequate systems and processes exist to avoid any operational risk failures that might place clients and stakeholders at risk.
    • Finalised own risk and solvency assessment (ORSA) framework which is now being implemented within the group. An ORSA is intended to ensure that an insurer assesses its risks and determines the capital required to protect against those risks. This process must be documented, evidenced and submitted to the regulator on at least an annual basis.
    • To minimise potentially inefficient provisions to meet regulatory capital requirements, the group applied to the FSB for permission for Investment Solutions to implement an internal model to calculate its capital requirements. Such permission was granted and significant progress made with the implementation of such an internal model.
  2. In light of the group’s greater strategic focus on AfriNet, the group extended the enterprise-wide risk management framework fully to integrate all AfriNet subsidiaries.
  3. To better understand the financial sustainability position of the group, an exercise to determine the stressed conditions that the group could be exposed to was undertaken with the participation of the board and senior executives. This subsequently led to the building of stress-testing models and accompanying contingency plans in the eventuality of the stressed situations identified arising.
  4. The group continued to evolve its risk management approach to ensure flexibility and relevance to its business needs in a changing regulatory and operating environment. As a result of the listing of the group on the JSE, greater focus was placed on improving compliance requirements and enhancing the reputational risk management model.
  5. Safety, health and environment and business continuity programmes were significantly modified.
  6. The group’s risk appetite measures and dashboard were realigned to ensure that risk-tolerance levels continue to protect our stakeholders, specifically our clients.
  7. In light of the recent amendments and proposed amendments to money laundering and corruption laws, the group undertook a full due diligence assessment of its anti-money laundering and financial crime programme. At year-end, areas had been identified for enhancement so as to effectively deal with any form of risk.
  8. The group completed the Alexander Forbes risk management strategy for implementation during the 2015/16 financial year.

For details on our risk outlook, emerging risks and actions taken and planned, can be found here.