Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Consolidated Financial Statements Company Financial Statements Pillar 3
the strategie and day-to-day decision-making processes.
The purpose of operational risk management is to identify,
assess, mitigate and monitor the various types of operational
risk.The operational risk measurement supports those
responsible for operational risk prioritisation and deployment of
people and resources.
Within Rabobank Group, the departments involved in the
primary processes of the bank form the 'first line of defence'.
They are fully responsible for day-to-day risk acceptance and
for integrated risk management and mitigation within the
approved risk appetite. The Compliance, Legal and Risk(CLR)
functions together constitute the 'second line of defence'.
The second line functions have a monitoring role with regard
to all types of operational risk and they monitor the way in
which 'the first line of defence' manages these risks. In addition
and independently from the first line, they report on the risk
profile and appetite breaches to senior management and the
Executive Board. Internal Audit forms the 'third line of defence'.
At group level, the Risk Management Committee (RMC) is
responsible for formulating policy and setting parameters.
Compliance, Legal and Risk also report quarterly to the RMC
on changes in operational risks at group level. Delegated risk
management committees have been established within the
group's entities.Their responsibilities include monitoring all
operational risks at entity level (amongst others: Conduct risk,
continuity risk, Information Security risk, Fraud risk including the
legal and reputational impact thereof).
The annual risk management cycle consists of a group-wide
Scenario programme and Risk Self-Assessment that identifies
the more material operational risks of Rabobank Group.
After assessment, if and when risks fall outside the defined
risk appetite, mitigating measures are taken by first line and
monitored by second line.
3.10 Legal and arbitration proceedings
Rabobank Group is active in a legal and regulatory environment
that exposes it to substantial risk of litigation. As a result,
Rabobank Group is involved in legal cases, arbitrations and
regulatory proceedings in the Netherlands and in other
countries, including the United States.The most relevant legal
and regulatory claims which could give rise to liability on the
part of Rabobank Group are described below. If it appears
necessary on the basis of the applicable reporting criteria,
provisions are made based on current information; similar types
of case are grouped together and some cases may also consist
ofa number of claims. The estimated loss for each individual
case (for which it is possible to make a realistic estimate) is not
reported, because Rabobank Group feels that information of this
type could be detrimental to the outcome of individual cases.
When determining which of the claims is more likely than
not (i.e., with a likelihood of over fifty percent) to lead to
an outflow of funds, Rabobank Group takes several factors
into account.These include (but are not limited to) the type
of claim and the underlying facts; the procedural process and
history of each case; rulings from legal and arbitration bodies;
Rabobank Group's experience and that of third parties in
similar cases (if known); previous settlement discussions; third-
party settlements in similar cases (where known); available
indemnities; and the advice and opinions of legal advisers and
other experts.
The estimated potential losses, and the existing provisions,
are based on the information available at the time and are
forthe main part subject tojudgements and a number of
different assumptions, variables and known and unknown
uncertainties.These uncertainties may include the inaccuracy
or incompleteness of the information available to Rabobank
Group (especially in the early stages ofa case). In addition,
assumptions made by Rabobank Group about the future
rulings of legal or other instances or the likely actions or
attitudes of supervisory bodies or the parties opposing
Rabobank Group may turn out to be incorrect. Furthermore,
estimates of potential losses relating to the legal disputes
are often impossible to process using statistical or other
quantitative analysis instruments that are generally used to
make judgements and estimates. They are then subject to a still
greater level of uncertainly than many other areas where the
group needs to make judgements and estimates.
The group of cases for which Rabobank Group determines
that the risk of future outflows of funds is higher than fifty
percent varies over time, as do the number of cases for which
the bank can estimate the potential loss. In practice the end
results could turn out considerably higher or lower than the
estimates of potential losses in those cases where an estimate
was made. Rabobank Group can also sustain losses from legal
risks where the occurrence ofa loss may not be probable, but
is not improbable either, and for which no provisions have
been recognised. For those cases where (a) the possibility of
an outflow of funds is less likely than not but also not remote
or (b) the possibility of an outflow of funds is more likely than
not but the potential loss cannot be estimated, a contingent
liability is shown.
Rabobank Group may settle legal cases or regulatory
proceedings or investigations before any fine is imposed or
liability is determined. Reasons for settling could include (i) the
wish to avoid costs and/or management effort at this level, (ii) to
avoid other adverse business consequences and/or (iii) pre-empt
the regulatory or reputational consequences of continuing with
disputes relating to liability, even if Rabobank Group believes it
has good arguments in its defence. Furthermore, Rabobank
Group may, forthe same reasons, compensate third parties for
their losses, even in situations where Rabobank Group does not
believe that it is legally required to do so.
277 Notes to the company financial statements