Risk management
Risk management organisation
An important element of banking is deliberately taking well-considered risks.
Rabobank Group pursues a prudent risk policy which entails a moderate risk
profile. At the end of 2007, Rabobank Group obtained permission from the Dutch
Central Bank to use the most advanced calculation methods for the capital
requirement under Basel II, which came into force for Rabobank Group on
1 January 2008. The turbulence in the financial markets did not leave Rabobank
Group untouched but did not affect its financial soundness.
Principles of risk management
Risk management is performed at various levels within Rabobank Group. At the highest
level, the Executive Board determines the risk strategy, policy principles and limits, under the
supervision of the Supervisory Board and is advised by the Balance sheet and Risk Management
Committee Rabobank Group (BRMC-RG) as well as the Credit Policy Committee Rabobank
Group. The Supervisory Board regularly reviews the risk exposure of Rabobank Group's
activities and portfolio. The CFO, who is also a member of the Executive Board, is responsible
for the implementation of Rabobank Group's risk policy. Within Rabobank Group, two
directorates share the accountability for its risk policy. Group Risk Management is responsible
for the policy regarding interest rate, market, liquidity, currency and operational risk, as well
as for the credit risk policy at portfolio level. Credit Risk Management is responsible for the
policy for accepting new clients in terms of credit risk at the individual customer level.
In addition, risk management is embedded within the Group entities, with independent risk
control departments monitoring the risks that are relevant for the entity in question.
The primary objective of risk management is the protection of Rabobank Group's financial
strength. Risk management is based on the following principles:
- Protecting the Group's financial strength: Rabobank Group controls risks in order to limit
the impact of potential adverse events, both on its capital and on its financial results.
The risk appetite must be proportional to the available capital. An economic capital
framework has been developed to quantify this.
- Protecting the Group's reputation: reputation is essential for the proper performance of a
banker's profession and needs to be diligently preserved.
- Risk transparency: for a good insight into Rabobank Group's positions, it is vital to identify
all risks. Risks must always be considered as accurately as possible in order to be able to
make sound commercial decisions.
- Management responsibility: Rabobank Group's business entities are individually
responsible for their results as well as for their risks associated with their operations.
A balance must be found between risk and return, while of course duly observing the
relevant risk limits.
- Independent risk control: this is the structured process of identifying, measuring,
monitoring and reporting risks. In order to ensure integrity, the risk control departments
operate independently of the commercial activities.
Risk policy within Rabobank Group has been embedded according to these principles.
To manage all the different risks, an extensive system of limits and controls has been put into
place within Rabobank Group.
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Report of the Executive Board
