Delivering a Risk-Led TransformationGillian Weatherill– Head of Operational Risk
Agenda• HML Overview• Journey• Risk Management• Outcomes• Whats next’• Questions
Service range• Financial services prime  and subprime UK residential  mortgages.• RSS2- rating special  servicing• Over £4...
Journey “The greatest antidote to worry….is preparation. The more you try to envisage what might happen and what your best...
Risk Management Effectiveness Review
We recognised that there were gaps in our approach to Operational Risk Management…..•Silo operational risk processes.• Key...
Our approach, closed gaps and enabled us to meet ourchallenges...• Increased resources for  assurance activity and “deep  ...
Risk Management Framework
Risk ManagementRemember that all models are wrong; thepractical question is how wrong do they have tobe to not be useful.”...
Risk Role in HML’s Strategic Execution        To provide excellence in risk management to support the sustainable         ...
Risk Management Approach    The HML enterprise wide risk framework and supporting structure is designed to promote a risk ...
Focus on integrated Governance, Risk & Compliance                                    RISK                                 ...
Risk Identification and Assessment The ERM framework is used to understand the links between what we want to do, what coul...
Control Effectiveness  The Control Self Assessment (CSA) quarterly certification process was  introduced in Q4 2009  The p...
Outcomes: So what?
Direct Operational Losses by Year                        The graphs opposite show the operational                        l...
Audit ActionsThe graphs are based on all issues                 % of issues added each year by Graderaised from internal a...
•Q&A       18
Strategy and Risk Management ExecutiveBreakfast3 Movember 2011
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HML Risk Transformation

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This presentations tells the story of the Risk-led transformation that HML has undertaken over the last 18 months. It outlines some of the key challenges, how they were overcome and the benefits delivered.

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HML Risk Transformation

  1. 1. Delivering a Risk-Led TransformationGillian Weatherill– Head of Operational Risk
  2. 2. Agenda• HML Overview• Journey• Risk Management• Outcomes• Whats next’• Questions
  3. 3. Service range• Financial services prime and subprime UK residential mortgages.• RSS2- rating special servicing• Over £43bn residential and commercial mortgages currently under management in UK and Ireland• 1,300 employees based across 3 UK sites, including a 450 seat call centre handling up to 13,000 calls per day
  4. 4. Journey “The greatest antidote to worry….is preparation. The more you try to envisage what might happen and what your best response and options are, the more you are able to allay your fears for the future.” John Glenn, Astronaut© HML 2010. All rights reserved. 4
  5. 5. Risk Management Effectiveness Review
  6. 6. We recognised that there were gaps in our approach to Operational Risk Management…..•Silo operational risk processes.• Key Risks identification disconnected from performance & objectives• KRI’s definition – partial• Policy documents – limited governance and assurance• Lack of enabling technology• Poor alignment to strategy
  7. 7. Our approach, closed gaps and enabled us to meet ourchallenges...• Increased resources for assurance activity and “deep dive” work• Risk integrated with Strategy• Comprehensive set of Key Risks & Controls• Robust enabling technology to support the risk management framework• Comprehensive policy suite• Maturity model & effectiveness BSC to set change agenda
  8. 8. Risk Management Framework
  9. 9. Risk ManagementRemember that all models are wrong; thepractical question is how wrong do they have tobe to not be useful.” George E. P. Box ( Statistician)©© HML 2010. All rights reserved.9 HML 2010. All rights reserved. 9
  10. 10. Risk Role in HML’s Strategic Execution To provide excellence in risk management to support the sustainable achievement of HML’s strategic objectives within its defined risk appetite. ADVICE OVERSIGHT CHALLENGE Business focused advice and Passionate focus on supporting Continuous improvement in risk oversight which adds value business excellence management practices Oversight, Challenge & Functional Leadership Delivered through highly skilled and positively motivated risk people, within an overall approach respected and valued by the business. 10
  11. 11. Risk Management Approach The HML enterprise wide risk framework and supporting structure is designed to promote a risk aware culture and to help ensure that effective procedures are in place to identify, assess, measure and monitor risk across HML. The objective is to provide: Independent Integration of risk Clear accountability oversight and management as part for the management challenge of the of day to day of risks. management of risk businessRisk Management Systems and Controls reduce risk, minimise losses and provide peace of mind that a robust and effective control framework is in place. © HML 2009. All rights reserved. 11
  12. 12. Focus on integrated Governance, Risk & Compliance RISK COMPLIANCEGOVERNANCE Process that ensures HML adheres Extent of uncertainty around achievement ofProcess by which ELT & SLG set to its internal policies, and that business objectives. Risk management beingoverall business objectives and policies and procedures established the process of identifying, sourcing,oversee progress towards those to comply with applicable laws and measuring, mitigating and monitoring risk.objectives. regulations are performing as Purpose being to: - reduce to acceptable level variability in intended. pursuit of opportunities - minimising impact of extreme events - take prudent risks that HML can manage successfully as it creates value. Event identification Control activities Internal Environment Risk assessment Info & communication Objective Setting Risk response Monitoring Aligned activities © HML 2009. All rights reserved. 12
  13. 13. Risk Identification and Assessment The ERM framework is used to understand the links between what we want to do, what could stop us, and how we manage and monitor performance. All the data is held in our bespoke software solution ‘Insight’. What process do we need How do we monitor changes in What threats will stop us to control and what is the performance, risk and controls What are we trying to achieve our objectives? right level of control? effectiveness? achieve? Performance Risk Controls Indicators Objectives Key Risks Key Controls Key Indicators 13
  14. 14. Control Effectiveness The Control Self Assessment (CSA) quarterly certification process was introduced in Q4 2009 The process involves all key controls across all divisions being reviewed, capturing:- • the control purpose • an assessment of the effectiveness of the control • documentation of proof to support the certification Line 1 Line 2 challenge validation Key Certification Controls -Type -Certified effectiveness - Assessment score - Improvement action - Expected performance 14
  15. 15. Outcomes: So what?
  16. 16. Direct Operational Losses by Year The graphs opposite show the operational losses paid out from January 2007 - September 2011, by value and volume in the year the error occurred. • The improvement in performance is illustrated and there has been a 93% reduction in the value of losses that have occurred during 2010 compared with those that occurred during 2008. • From 2007, there has been a 56% reduction in the volume of losses that occurred during 2010 compared with those that occurred during 2008. In addition, the severity of losses has reduced over the years and, for the losses that occurred during 2010, 97% of the volume of these were for individual amounts that were less than £1k.
  17. 17. Audit ActionsThe graphs are based on all issues % of issues added each year by Graderaised from internal audits, externalreviews and internal compliance and 100%assurance reviews 90% 80%The percentage of issues that are rated 70%Significant / High risk has decreasedyear on year since 2008. In 2008 24% 60%of issues were rated Significant or High. 50%This reduced to 14% in 2009 and again 40%to 10% in 2010. So far in 2011 the % of 30% Low / Efficiencyhigh issues stands at 5% of the total Mediumissues added. 20% Significant / High 10%The percentage of issues rated medium 0% 2008 2009 2010 2011risk has also decreased from 48% in2008 to 45% in 2011. 17
  18. 18. •Q&A 18
  19. 19. Strategy and Risk Management ExecutiveBreakfast3 Movember 2011

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