Company
Group Heads are responsible for ownership of material risks that arise in, or because of, their business’ operations, including identification, measurement, evaluation, monitoring, control and mitigation of these risks. Before making decisions, clear analysis of the risks is sought to ensure those decisions are consistent with the risk appetite and strategy of Macquarie.
Macquarie’s risk management approach is based on examining the consequences of worst-case outcomes and determining whether these are acceptable and within Macquarie’s risk appetite. This approach is adopted for all material risk types and is often achieved by stress testing. Macquarie operates a number of sophisticated quantitative risk management processes, but the foundation of the approach is the informed consideration of both quantitative and qualitative inputs by experienced professionals.
Macquarie places significant importance on having a strong, independent risk management function to review, challenge and sign-off all material risk acceptance decisions. It is essential that RMG has the capability to do this effectively. RMG has invested in recruiting skilled professionals from a range of industries, including those with trading or advisory and capital markets experience. For all material proposals, RMG’s opinion must be sought at an early stage in the decision-making process. The approval document submitted to Senior Management must include independent input from RMG on risk and return.
Macquarie’s approach to risk management adopts the ‘three lines of defence’ model, which sets risk ownership responsibilities functionally independent from oversight and assurance:
A sound risk culture has been integral to Macquarie’s risk management framework since inception. Macquarie sets, promotes, monitors and reflects on the effectiveness of our risk culture. All staff have a role in managing risk. Ownership of risk, including risk culture, is at the business level. The Board, assisted by the Board Risk Committee, is responsible for forming a view on Macquarie’s risk culture and the extent to which it supports the ability of Macquarie to operate consistently within its risk appetite. The Board also identifies and monitors any necessary or desirable actions to change the risk culture.
Macquarie’s risk management framework is the totality of systems, structures, policies, processes and people within Macquarie that identify, measure, evaluate, monitor, report and control or mitigate all internal and external sources of material risk. Macquarie maintains a single risk management framework that is applied appropriately throughout the Operating and Central Service Groups. In determining those risks that are material to Macquarie, we assess the potential for a risk to affect our earnings resilience and financial strength across market cycles, our ability to meet regulatory obligations, our stakeholders, and our reputation.
Macquarie’s material risks include:
