IMC ANNUALREPORT 2020 - Flipbook - Page 49
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. FINANCIAL RISK MANAGEMENT
This note outlines the Group’s exposure to financial risks and how these
risks could affect the future financial performance.
3.1. RISK ORGANIZATION AND GOVERNANCE MODEL
Risk Management at the Group is inherent to the entire structure of the
Group and risk management and compliance responsibility resides
within all levels of the organization from the Supervisory Board and
Management Board to the local management teams and risk managers
as well as with the traders and developers themselves.
Risk management supports and facilitates the firm’s strategy and is an
integral part of our day-to-day operations. Risk decisions can be taken
by relevant staff within a framework of limits and processes outlined by
Risk Management, whereas a comprehensive set of tools step in when
limits are breached. Every region has its own local Risk Management
and Compliance department overseen by the Group Chief Risk Officer.
The Group CRO reports to the CEO of IMC B.V., monthly to the
Management Board and quarterly to the Assurance Committee.
Consolidated
financial statements
Notes to the consolidated
financial statements
Company
financial statements
Other information
Independent Auditor’s report
A key IMC value demonstrating our approach to risk is “being here to
stay”, which means that there is no appetite for strategies and practices
that may put the firm at risk. We foster a culture of openness and
transparency around risks in the Group to ensure that risks are taken in
line with agreed-upon policies and procedures, within acceptable limits,
and have clear ownership of responsibility. Risk appetite and risk limits
are defined by the Management Board and allocated down into the
organization to those responsible for the ownership and management
of the risks. In addition, local risk positions are consolidated at the
Group level to provide for a firm-wide overview of risks taken within the
Group. All senior employees have 50% of their variable remuneration
deferred. These deferred amounts are loss-absorbing creating a strong
and healthy focus on risks within the firm.
The Group’s risk governance framework is organized according to the
three lines of defense model.
IMC ANNUAL REPORT 2021
The first line is Risk Ownership. The responsibility to manage risk is the
domain of the primary business. The primary business consists of
trading (making trading decisions) and IT (managing trading
technology).
The second line is Risk Oversight, which is the domain of the Risk
Management and Compliance department. Whereas Compliance
focuses on the regulatory framework in which we operate, Risk
Management ensures the total levels of financial and operational risk
are aligned with the Group’s and the clearing organization’s risk
appetite and within regulatory limits. Risk Management sets limits and
processes for the business and controls these. Furthermore, Risk
Management and Compliance assesses all existing and new business
activities for adherence to risk appetite and defined tolerance levels and
works closely with the business to line up any new activities.
The third line, Risk Assurance, entails the responsibility to provide
independent assurance on the effectiveness of governance, risk
management and internal control systems in relation to the most
significant risks, which threaten the achievement of the Group’s
objectives. Risk Assurance is the domain of the Internal Audit
department and the Assurance Committee.
The Assurance Committee, a sub-committee of the Supervisory Board,
focuses mainly on the control functions and the adequate functioning of
the second- and third-line-of-defense. All members of the Supervisory
Board are members of the Assurance Committee and the Assurance
Committee meets with the in- and external auditors, Finance & Control,
Risk and Compliance and Legal. Standard items on the agenda of the
Assurance Committee’s meetings are financial developments, regulatory
capital requirements and reporting to the Dutch Central Bank, the
external audit plan, the management letter and report of audit findings
issued by the external independent auditor, the internal audit plan,
findings and recommendations of internal audits, Risk and Compliance
reports, the annual Global Risk Control Self-Assessment and Internal
Capital Adequacy Assessment, as well as the Legal Report, pending
litigation, inspections and investigations by regulators and relevant
regulatory and legislative developments. The Assurance Committee
meets four times per year.
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