risk culture & risk appetite

Marie-Anne Haegeman

CRO KBC Business Unit Belgium

CRO CBC

Risk Culture & Risk Appetite

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KBC Group passport

Clients 10 million

Staff (FTEs) 36 177 57% 43% BEL 45% CEE 51% Rest 4%

Network 1 616 bank branches worldwide470 tied insurance agencies in Belgium various insurance distribution channels in CEEvarious online channels

Principal brands and market share

Belgium: KBC and CBC (20% in banking, 17% in life , 9% in non-life, 33% in investment funds )Czech Republic: ČSOB (19% in banking, 6% in life, 6% in non-life, 28% in investment funds )Slovakia: ČSOB (10% in banking, 5% in life, 3% in non-life, 7% in investment funds)Hungary: K&H (9% in banking, 3% in life, 5% in non-life, 17% in investment funds)Bulgaria: CIBANK and DZI (2% in banking, 10% in life, 10% in non-life)Ireland: KBC Bank Ireland (10% in retail mortgage loans, 3% in retail deposits)

Balance sheet total EUR 246 bn

AUM EUR 167 bn

Loans EUR 120 bn

Deposits EUR 151 bn

Life reserves EUR 27 bn

Market share: KBC’s own estimates; Loans: loans and advances to customers (excl. reverse repos); deposits; deposits from customers and debt certificates (excl. repos).Financial data at 31 March 2014; other data at 31 December 2013

KBC Investor Day - June 2014

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Passport of the Belgium Business Unit

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Risk appetite is not about avoiding risks

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It’s about taking risks in a controlled way

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In line with the vision, mission & strategy

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Supported by a strong risk culture

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And with client focus

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Reality check

When setting the risk appetite, does your firm:

1. Balance the risks with the mitigation costs

2. Balance the risks with the mitigation costs AND the client focus

3. None of the above

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=> Risk appetite

The amount and type of risk a companyis able and willing to accept in pursuit of its strategic objectives.

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Different stakeholders

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Risk management starts with the business

1st line

2nd line

3rd line

Risk

Audit

Support, challenge, report

Non financial risk Credit risk

ALM & Liquidity

Technical insurance risk

Control

Compliance

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Actors?

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Reality check

Is the risk appetite statement within your firm:

1. Really owned by the management?

2. Mainly a risk owned exercise?

3. None of the above

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How to cascade risk appetite to actionable level?

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Link with strategy

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But also making it measurable

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Link with building blocks risk management

Risk identificationRisk assessment

Risk monitoring

Reporting

Risk response & acceptance

Risk culture

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Communicate!

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Monitor

MEDIUM

Risk Appetite Current risk score

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Reality check

Is the risk appetite statement within your firm:

1. Known by most of the employees and really cascaded down to the operational level?

2. Only known up to the management level and monitored through high level management dashboards?

3. None of the above

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Focus points

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Watch the front door

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Pick your battles carefully

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Challenge the road towards the goal!

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Be independent

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Define the tipping point

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Be brave

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And KBC Business Unit Belgium?

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LIQUIDITY

PROFIT

CA

PIT

AL

STAK

EHO

LDER

S

KBC Group going forward:Monitored through the KBC performance diamond

KBC ‘Performance Diamond’The performance diamond defines, within the limits of the risk management playing field, the (nominal) targets for 4 performance dimensions:

- Net profit

- Capital

- Liquidity

- Stakeholders (clients, staff, society, shareholders)

for KBC Group and for all the business units.

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Aligned with our strategy

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Part of our culture