Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
Significant risks and uncertainties
Rabobank's risk management activities are an integral part of
strategy design and execution. New strategic initiatives may
open exciting opportunities, but the expected rewards must
be balanced against the related risks. Rabobank keeps track
of external developments and closely monitors how (future)
risks might impact the realisation of our strategic objectives.
Regular, structural top-down and bottom-up risk assessments
are performed to identify various types of risks, and specific
stress tests are conducted to calculate the impact of adverse
scenarios. An integrated overview of these risks, changes to
them and measures taken to address them are discussed
periodically in the Managing Board and Supervisory Board:
Market conditions:The sustained low interest rate
environment despite gradual winding down of extraordinary
monetary policy. Customer behaviour is rapidly changing
and digital innovation is increasing competition from new
entrants.
Execution capacity: To achieve the desired results in a
complex environment with legacy systems and challenging
change-management of projects requires different
competences.This puts considerable pressure on scarce
resources as we overhaul our IT landscape and improve data
quality.
Culture conduct:There is a fragile balance in public trust
which is quickly disturbed. Our employees are expected
to adhere to our values and act according to regulations.
But strict adherence to legislation is no longer sufficient:
facts from the past are judged by the standards of today.
Therefore we need to anticipate on developments and
be aware of what it means to be market leader in specific
portfolios. Rational financial approaches should be
accompanied by regular attention to'softer', more intuitive
signals received and a culture to act on those signals.
Because of the rapidly changing environment, we always
need to be aware of the risks of misconduct. Thats why
we have implemented serveral measures to mitigate the
conduct risks we have experienced in the last couple of years.
While we will do everything we can to mitigate the risks, we
can never mitigate all misconduct risks, because of the size of
our organisation, the complexity of the rules and regulations
and the moving targets within society.
Geopolitics: Geopolitical developments can drastically
change global dynamics. Negative impacts from regulatory
developments such as the reform of Basel III and other
emerging regulatory requirements put a strain on resources.
Interpretation and execution on new regulation is extremely
important and to a certain extend drive strategic choices and
cost.
Data Service disruption: Cyber threats are increasingly
sophisticated and attacks are more frequent, which requires
increased legislation and attention to security risks, vendor
management and continuity. A new hybrid IT bank landscape
with expanding cloud initiatives is changing the role of the IT
department and posing challenges to the governance.
Sustainability: Climate change, including its effect on
the food chain, can influence financial stability through
insurance liabilities and the value of financial assets and real
estate. New financial risks emerge from the energy transition
towards a lower carbon economy. Given our Food Agri
focus these elements will more likely than not impact our
customers and with that Rabobank.
Financial accounting risks: In preparing the financial
statements management applied judgement with respect to
estimates and assumptions that affect the amounts reported
for assets and liabilities, the reporting of contingent assets
and liabilities on the date of the financial statements, and
the amounts reported for income and expenses during the
reporting period.
Our accounting principles also require critical estimates
that are based on assessments and assumptions. Although
management estimates are based on the most careful
assessment of current circumstances and activities on the
basis of available financial data and information, there is
always a risk that the actual results may deviate from these
estimates, beyond what was anticipated or provide for in our
financial statements.
Taxation risk: Tax treatment of transactions is not always
clear or certain and, in a number of countries, prior year
tax returns often remain open and subject to tax authority
approval for lengthy periods. The tax assets and liabilities
reported are based on the best available information, and
where applicable, on external advice. We also are subject to
changing regulations, because of changing of domestic and
international tax developments. Because of this there is a risk
that we could suffer losses due to additional tax charges or
other financial costs. Differences between the final outcome
and the estimates originally made are accounted for in the
current and deferred tax assets and liabilities in the period in
which reasonable certainty is obtained.
Governance
To ensure effectiveness of risk management across the group,
Rabobank works with the Three Lines of Defence'model. First
line functions that own and manage risk within the bank, the
second line functions (Risk Management and Compliance) that
oversee risk, and an independent third line function (Audit) that
provides assurance on the effectiveness of the first and second
lines of defence.
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