Risk Management Group
Risk Management Group (RMG) functions include Credit; Prudential, Capital and Markets; Market Risk; Operational Risk; Compliance; Quantitative Applications and Internal Audit.
The Chief Risk Officer has oversight of Internal Audit jointly with the Board Audit Committee. An overview of RMG divisions is provided below and a full Risk Management Report is contained in the Macquarie Group Limited Annual Report.
The Credit Division assesses and minimises the risk of loss arising from:
- the failure by counterparties to repay loans or honour contracts
- equity investments
- equity underwritings
- investments in funds
- investments in leased or traded assets.
Prudential, Capital and Markets (PCM) confirms that Macquarie discharges its obligations to APRA and other prudential regulators, including compliance with prudential standards, and maintains a constructive relationship with the regulators. PCM also monitors aggregate risks across all risk types relative to Macquarie’s economic capability to bear risk.
Market Risk develops and monitors the necessary framework to constrain the risk of losses across both banking and trading portfolios that may arise from adverse movements in market prices and volatility.
Operational Risk ensures that an appropriate framework exists to identify, assess and manage operational risk from a Group-wide perspective. Macquarie defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. It is also responsible for Macquarie’s operational risk capital measurement methodology.
Compliance assesses regulatory and reputation risks from a Macquarie-wide perspective. It creates Macquarie-wide policies and procedures to manage these risks, and it monitors and oversees the management of compliance risks by each of Macquarie’s businesses. A significant number of Compliance staff are co-located with the business and confirm that day-to-day compliance obligations are discharged at the business level. These staff report into the Regional Head of Compliance and ultimately into the Global Head of Compliance.
The Quantitative Applications Division reviews and approves all pricing models used within Macquarie’s trading systems. QAD is also responsible for the testing of models which are used for calculating capital for financial or regulatory disclosures.
Internal Audit provides independent assurance to senior management and the Board Audit Committee on the quality and effectiveness of Macquarie’s internal controls, risk management and governance systems and processes.
RMG’s oversight of risk is based on the following five principles:
- Independence – RMG is independent of Operating and other Central Service Groups. The Head of RMG, as Macquarie’s Chief Risk Officer, reports directly to the Chief Executive Officer with a secondary reporting line to the Board Risk Committee. RMG approval is required for all material risk acceptance decisions
- Centralised prudential management – RMG’s responsibility covers the whole of Macquarie. It assesses risks from a Macquarie-wide perspective and provides a consistent approach across all operating areas
- Approval of all new business activities – Operating areas cannot undertake new businesses or activities, offer new products or enter new markets without first consulting RMG. RMG reviews and assesses the risks, and sets prudential limits. Where appropriate, these limits are approved by the Executive Committee and the Board
- Continuous assessment – RMG continually reviews risks to account for changes in market circumstances and developments within Macquarie’s operating areas
- Frequent monitoring – Centralised systems exist to allow RMG to monitor credit and market risks daily. RMG staff liaise closely with Operating and Central Service Groups.
The Group currently has staff in Abu Dhabi, Adelaide, Auckland, Bangkok, Brisbane, Cape Town, Chicago, Christchurch, Edinburgh, Geneva, Gurugram, Hong Kong, Houston, Jacksonville, Jakarta, Johannesburg, Kuala Lumpur, London, Manila, Melbourne, Mumbai, New York, Perth, Philadelphia, Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo and Toronto.