Managing risk is a fundamental part of banking. While some banks assess risk to set limits as part of a short term strategy of maximising profits, Triodos Bank manages risk as part of a long-term strategy of resilience.
Risk Management is embedded throughout the organisation. While business managers are primarily responsible for delivering a resilient business approach, they are supported by risk managers, with local business knowledge, to identify, assess and manage risk. At a group level, a risk outlook process is implemented to align Triodos Bank’s risk profile with its risk appetite level, or the willingness to take risk in achieving its business objectives.
During this process each business unit performs a strategic risk assessment to identify and manage potential risks that could impede the realisation of their business objectives. The outcome of these assessments are consolidated and used as input for the Executive Board’s own risk assessment and to determine Triodos Bank’s risk appetite.
The outcome of these assessments was used to determine scenarios that were used to stress test Triodos Bank’s solvency, liquidity and profitability. The results of these tests were satisfactory.
A fully integrated risk management report gives insights into the Triodos Bank risk profile in relation with the accepted risk appetite. The report gives insights on specific risk themes and provides an integrated picture of risk at business unit level. This report is made four times a year and is presented to the Supervisory Board Audit and Risk Committee.
The Asset and Liability Management system provides monitoring tools for the monthly Asset and Liability Committee on interest rate risk, liquidity risk, currency risk and capital management.
The credit risk function plays an important role in assessing the risk of new loans and managing the credit risk of the entire loan portfolio.
The assessment of credit risk is as closely connected to the customer possible, and therefore primarily the responsibility of local branches. The central risk function sets norms, approves large loans, and monitors the credit risk of Triodos Bank’s entire loan book.
The of Triodos Bank’s annual accounts provides a description of the main risks related to the strategy of the company. It also includes a description of the design and effectiveness of the internal risk management and control systems for the main risks during the financial year. No major deficiencies in the internal risk management and control systems were discovered in the financial year. The developments of the main risks within Triodos Bank are described in the integrated risk management report and discussed on a regular basis in the Audit and Risk Committee of the Supervisory Board.