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

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.

Core risk management principles

Ownership of risk at the business level

Group Heads are responsible for ownership of material risks that arise in, or because of, the business’ operations, including identification, measurement, control and mitigation of these risks. Before taking decisions, clear analysis of the risks is sought to ensure those taken are consistent with the risk appetite and strategy of Macquarie.

Understanding of worst case outcomes

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 highly experienced professionals.

Requirement for an independent sign-off by risk management

Macquarie places significant importance on having a strong, independent Risk Management Group charged with signing 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, including those with trading or investment banking 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.

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’:

  • primary responsibility for risk management lies with the business. The risk owner is the first line of defence. An important part of the role of all staff 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
  • Internal Audit, as the third line, provides independent and objective risk-based assurance on the compliance with, and effectiveness of, Macquarie’s financial and risk management framework.

Risk culture and conduct risk management

A sound risk culture has been integral to Macquarie’s risk management framework since inception. Primary responsibility for risk management in Macquarie, including risk culture, is at the business level. The Board, assisted by the Board Risk Committee, is responsible for:

  • Reviewing, endorsing and monitoring Macquarie’s approach to risk culture and conduct.
  • 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.

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Risks we manage

Macquarie’s risk management framework incorporates active management and monitoring of a range of material risks, they include:

Conduct risk

The risk of behaviour or action taken by individuals employed by, or on behalf of, Macquarie or taken collectively in representing Macquarie that may have a negative outcome for our clients, counterparties, the communities and markets in which we operate, our staff, or Macquarie.

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Credit risk

The risk of a counterparty failing to complete its contractual obligations when they fall due. The consequent loss is either the amount of the loan or financial obligation not repaid, or the loss incurred in replicating a trading contract with a new counterparty.

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Cyber and information security risk

The risk of accidental or intentional unauthorised use, modification, disclosure or destruction of information resources, which compromises their confidentiality, integrity or availability in a way that significantly impacts the operation of a Macquarie business.

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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.

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Equity risk

The risk of a change in value of a Macquarie entity investment.

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Legal risk

The risk of loss arising from actual or perceived breaches of law and regulation and the risk of loss when enforcing contractual or legal relationships.

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Liquidity risk

The risk that Macquarie is unable to meet its financial obligations as and when they fall due. Macquarie’s liquidity risk management framework is designed to ensure that it is able to meet its funding requirements as they fall due under a range of market conditions.

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Market risk

The risk of a change in the value of Macquarie’s positions as a result of changes in market conditions.

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Operational risk

The risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events.

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Regulatory and compliance risk

The risk of failure to comply with laws, regulations, rules statements of regulatory policy, and codes of conduct applicable to Macquarie’s financial services and other regulated activities.

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Reputation risk

The risk of damage to Macquarie’s reputation. In managing reputation risk, we consider damage to our reputation from the perspective of our clients, shareholders, regulators, staff or the communities in which we operate.

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Tax risk

The risk of failure to comply with applicable tax laws, regulations or rulings, or failure to meet other Revenue Authority requirements or expectations. This includes any event, action or inaction in tax strategy, operations, financial reporting or compliance that either adversely affects Macquarie’s tax or business objectives or results in an unanticipated or unacceptable level of monetary, financial statement or reputational loss or exposure.

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What We Stand For

Three principles guide our approach: Opportunity, Accountability and Integrity.

Corporate Governance

Learn about our corporate governance.

Environmental, Social & Governance

Learn about our environmental, social and governance (ESG) commitment.