Risk management
Risk appetite
Product approval
Audits
Remuneration policy
organised about issues including risk management, the workings of, and developments in,
short-term funding markets, back-testing, operational and reputational risk, information
security, pensions, operational excellence/straight-through processing (STP),Treating Customers
Fairly, funding, asset and liability management, and solvency. Individual job profiles are drawn
up for all vacancies on the Supervisory Board, including openings for the position of Chairman.
The profiles describe aspects such as the integrity, expertise and availability required of the
relevant Supervisory Board member. Furthermore, every year the Supervisory Board evaluates
the performance of the Supervisory Board as a whole and that of its individual members.
Further information on the activities of the Supervisory Board in 2012 can be found in the
report of the Supervisory Board contained elsewhere in this Annual Report.
Another central theme of the Dutch Banking Code is risk management. Rabobank Group's
conservative risk appetite stems from the sound objectives of stability and solidity that
Rabobank has pursued for many years. Moreover, Rabobank was also found to have controlled
risks effectively during the recent period of economic and financial turmoil, and continues its
efforts to shore up the quality of risk management practices and the risk culture within the
organisation. In stepping up risk management in 2012, top-down and bottom-up risk
assessments and various stress tests were performed that included a more integrated analysis
of the different risk categories. A separate section on risk management can be found
elsewhere in this Annual Report.
Risk management takes place within the boundaries of risk that Rabobank is prepared
to accept. Rabobank has formulated a specific policy on this risk appetite at group level.
The Risk Appetite Paper, which was drafted as early as in 2010, is in compliance with the
provisions of the Banking Code. This Paper was adopted by the Executive Board and approved
by the Supervisory Board. Rabobank's strategy was taken as a starting point when defining
the risk appetite. Rabobank's risk appetite, which is linked to its core values, is submitted to
the Supervisory Board for approval once a year and also whenever any material amendments
are made. Following on from the risk appetite at group level, separate risk appetite papers
were prepared for all material group operations. The risk appetite cycle was further improved
in 2012 by setting up a monitoring process for comparing the risk profile to the defined risk
appetite. This process will be subject to continued development over the coming period.
The product approval process has been organised at group level. At the end of 2010, a group
framework came into effect that describes Rabobank Group's policy on the product approval
process and focuses on safeguarding product quality. Standards also apply to product
approval procedures and their organisation, as well as to individual product testing by group
entities. The entire product offering is periodically tested against current standards; in this
process, it is determined whether the products still meet the needs of customers and are in
their best interests. In this way, Rabobank is taking responsibility for its relationship with
customers and for the level of quality it offers. Group Audit checks whether the product
approval process has been designed properly, is present and is working effectively.
The Executive Board has audits carried out by Audit Rabobank Group (ARG), which holds
an independent position within the organisation. Every year, this department performs
audit procedures, based on an extensive risk assessment and an audit plan based on this
assessment, in order to check whether the internal control and risk management systems are
in order. The director reports directly to the Chairman of the Executive Board and has a direct
reporting line to the Audit, Compliance Risk Committee of the Supervisory Board and/or its
Chairman. Tripartite talks between the external auditor, the Dutch Central Bank (DNB) and
Rabobank (including ARG) are held at least once a year. The matters that come up for
discussion at these meetings include risk assessments, the audit plan and audit findings. The
Annual Report includes a statement by the Executive Board to the effect that the internal risk
management and control systems are designed such that the financial reports can be
considered to be reliable.
The Dutch Banking Code contains principles for a prudent, restrained and sustainable
remuneration policy that incorporates non-financial performance criteria. The rules governing
remuneration policy focus on the long term and on the avoidance of unwanted incentives
94 Annual Report 2012 Rabobank Group
