Risk Management at Macquarie
Our approach to risk management at Macquarie is based on stable and effective core risk management principles. It is supported by our longstanding approach to establishing and maintaining an appropriate risk culture.
Our approach
The acceptance of risk is an integral part of Macquarie’s operations. Strong independent prudential management has been a key to Macquarie’s success and stability over many years. The assumption of risk is made within a calculated and controlled framework that assigns clear risk roles and responsibilities represented by ‘three lines of defence’.
The first line of defence is at the business level, where primary responsibility for risk management lies. Part of the role of all business managers throughout Macquarie is to ensure they manage risks appropriately. The Risk Management Group (RMG) forms the second line of defence and independently assesses all material risks. The third line, which includes Internal Audit, independently reviews and challenges the Group’s risk management controls, processes and systems.
Refer to the Risk Management Report in the Annual Report for details on the Risk Management Framework. Additional information is available through these links:
Risk Management Group organisation structure
Risk culture and conduct risk management
A sound risk culture has been integral to Macquarie’s risk management framework since inception. It is continuously being maintained and improved. The long-held foundations of Macquarie’s risk culture are the principles of What We Stand For – Opportunity, Accountability and Integrity.
Learn more about our risk culture and conduct risk management
Risks we manage
The risk management framework incorporates active management and monitoring of a range of risks. They are listed below in alphabetical order.
Conduct risk
The risk of improper, unlawful, or unethical behaviour or action that may have a negative impact on Macquarie’s clients or counterparties or the fair and effective operation of the markets in which Macquarie operates.
Credit risk
The risk of a counterparty failing to complete its contractual obligations when they fall due.
Cyber risk
The risk of a circumstance or event with the potential to adversely impact organisational operations (including mission, functions, image, or reputation), organisational assets, or individuals through an information system via unauthorised access, destruction, disclosure, modification of information, and/or denial of service.
Environmental and social risk
The risk of reputational or commercial impacts due to failure to identify or manage material environmental or social issues including labour and employment practices, human rights, resource efficiency, climate risk, pollution prevention, biodiversity and cultural heritage.
Legal risk
The risk of loss arising from a breach of contract, law or regulation, the risk of litigation or regulatory enforcement or the risk that a contract is not capable of being enforced as expected.
Liquidity risk
The risk that Macquarie is unable to meet its financial obligations as and when they fall due.
Market risk
The risk of adverse changes in the value of Macquarie’s trading portfolios from changes in market prices or volatility.
Model risk
The risk of loss incurred from relying on outputs from models that are inadequately developed, validated, implemented, used and/or interpreted, or governed.
Operational risk
The risk of loss resulting from inadequate or failed internal processes, people or systems or from external events.
Regulatory and compliance risk
The risk of legal or regulatory sanctions, material financial loss, or loss to reputation Macquarie may suffer as a result of its failure to comply with laws, regulations, rules, statements of regulatory policy, and codes of conduct applicable to its business activities (not including operational risk failures).
Reputation risk
The risk of loss arising from negative perceptions held by customers, shareholders, counterparties, regulators, market analysts, other relevant parties - including government bodies - and the broader community.
Tax risk
The risk of loss arising from the misinterpretation of tax regimes and the manner in which they may be applied and enforced.
