Page 6 - Pillar 3 Disclosure
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Interest rate risk



Interest rate risk arises from a mismatch between the interest rate characteristics or maturity profiles of assets and liabilities. The Board 

approved Financial Risk Management Policy includes set limits for assets and liabilities on different interest rate bases. Where possible natural 

hedging between fixed rate mortgages and fixed rate savings bonds is used. Derivatives, in the form of interest rate swaps, are also used to 


manage interest rate risk within the Balance Sheet. The Society’s ALCO reviews interest rate risk with reference both to the FSA gap, interest 

exposure and basis reports on a monthly basis and reports its findings to the Board Risk Committee.



Liquidity risk




Liquidity risk is the risk that the Society will not be able to meet its financial obligations as they fall due. The Society has policies in place to 

ensure that it maintains sufficient funds in an appropriately liquid form to ensure that maturing obligations can be discharged in full as they fall 

due, and also that the Society can reasonably expect to meet any request for withdrawal of deposited funds. The Society’s ALCO considers 


liquidity risk, including liquidity stress testing on a monthly basis and reports its findings to the Board Risk Committee.



Operational risk




Operational risk is the risk of loss through inadequate or failed internal processes or systems, including human error or external events. 

Operational risks are logged and assessed on the Risk Register and mitigating actions are put in place to ensure their management. A range of 

insurance policies are in place to provide protection against such eventualities as business interruption, public and employer liability and certain 

losses through criminal activity. Outsourced services are assessed and managed for risk through contractual terms with agreed service level 

agreements, performance indicators and documented processes where relevant. An Operational Risk Committee considers and reviews 


operational risk issues and controls and reports to the Board Risk Committee. The Society’s most significant operational and business risk 

entering 2014 is the IT project. The project is managed via weekly operational project meetings, regular project steering meetings with the Chief 

Executive and Executive Team present, external project assurance and direct oversight by the Board.




Business risk



Business risk is the risk that the Society may not be able to carry out its business plan or its desired strategy and could therefore suffer losses if 

its income falls. This is a risk that every business faces, however the Society looks to mitigate this risk by having a diverse range of products so











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