Page 4 - Pillar 3 Disclosure
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2. Risk Management Objectives and Policies



The Society seeks to manage the risks that arise from its activities. This is important in order that the confidence of its members and the public 

at large is maintained. The Board is responsible for determining the framework for risk management and control. Risk is managed through Board 

and management committees and by adherence to Board approved policies and limits that are regularly reviewed and updated. The Society 


maintains a comprehensive risk register which is regularly reviewed by the Society’s Board Risk Committee. Exceptions and issues are reported 

to the Board. Managers are responsible for identifying the risks within their own area of operation and evaluating the risks and the likelihood of 

their occurrence. Controls are put in place to mitigate the potential exposure. The controls established are reviewed by managers, management 

committees and Internal Audit. The Society has outsourced its Internal Audit function to Deloittes. The Internal Audit function reports its findings 


to the Audit and Compliance Committee.



The Society’s principal risks are detailed below. In 2014 the Board considers our primary risk to be failure to migrate our IT systems. The 

migration is expected to be complete by July 2014.




Credit Risk



Credit risk refers to the potential risk that arises from customers (or counterparties) failing to meet their obligations as they fall due. Credit risk 


arises primarily from the Society's lending activities, known as retail credit risk, but also as a result of the Society's investments as part of its 

liquidity operations, known as wholesale credit risk. Retail credit risk materialises when a loss is incurred through non-repayment of mortgage 

lending. This risk is mitigated through our Board approved Lending Policy which shows our low risk tolerance for our lending and includes clear 

guidelines for mandate levels and lending. The Retail Credit Risk Committee is an executive committee that meets monthly to consider and 

review mortgage lending. Clear guidelines for mandate levels and lending have been laid down. The Society focuses on supporting borrowers 


who may be having payment difficulties to help mitigate any potential loss and assist the borrower in returning to a normal repayment pattern. 

Where we consider the potential for a loss we make a provision for this in accordance with our policies. The Society’s Retail Credit Risk 

Committee and Board Risk Committee receive and review management information on the number of forbearance cases and the level of 

provision on a quarterly basis.



Wholesale credit risk is the risk of default on assets held to mitigate liquidity risk. We manage the risk of investing these liquid assets by having 


strict criteria for accepting counterparties to invest in and absolute limits for these investments with each counterparty. Exposures to treasury 

counterparties (including swap counterparties) are taken in accordance with the Board-approved Treasury Management policy, which include a 

requirement for counterparties to have a Fitch rating of A- or higher (except building societies where management may use their specialist









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