Risk-Led Transformation: Journey continues Gillian Weatherill Head of Enterprise Risk

21st March 2013

Agenda

• HML Overview

• Initial Challenge

• Approach

• Successes

• Ongoing

Challenges

HML Overview

Financial Services Outsourcer

• Over £43bn residential and

commercial mortgages currently

under management in UK and

Ireland

• Over 34 Clients including High

Street names

• 1,300 employees based across

3 UK sites, including a 450 seat

call centre handling up to 13,000

calls per day

• Standby Servicer on over 100

transactions, one 48 hr notice

• Ratings:

Fitch RPS2+

S&P Above Average

Initial Challenge

…the year was 2008

• Regulatory interest

• Clients – various views, appetites and approaches

• Process variations

• Change in business model

• Issues from prior years

• Silo based approach to managing risk

Approach

Risk Management Effectiveness Review

Approach

What we wanted from our RMF

Board agreement of the approach and philosophy….

“To promote a risk aware culture, ensuring that effective procedures are in place to identify, assess, measure and monitor risk across HML.”

The objective to provide:

– Clear accountability for the management of risk.

– Independent oversight and challenge of the management of risk.

– Integration of risk management as part of day to day business

Approach

Summary

• Governance – Vision integrated into company strategy

– Committees

– Roles

– Policies

– Reports

• Risk Management Policy Suite

• Risk Management Tools – Stratex

– Maturity Model & BSC

– Risk Champions

• Training & Awareness

• Control Framework – Quarterly RCSA

– Quality framework

….and don’t forget

the workshops!

Success

Outcomes

FSA comfortable

Operational losses reduced

Pillar 2 capital reduced

Rating agency views

Framework implemented and maintenance in place

In Fitch’s rating report on HML published 11th September 2012 it

referred to HMLs risk management framework as being

“significantly enhanced compared to peers” and our tool

demonstrating “best practice within the industry”.

Since HML commenced its

initiative to implement an

enterprise-wide risk

management framework in

March 2008, the Pillar 2 for

HML has reduced by 81.2%

i.e. £40.6m.

Success

Measure the right things

.

95% reduction in the value of losses.

10

Success

Measure the right things

Ongoing Challenges

Risk fatigue

Success breeds complacency

Maturity complexity

Awareness and knowledge

Activities become tasks

A final word from the wise…..

“The major difference between a thing that might go wrong

and a thing that cannot possibly go wrong is that when

a thing that cannot possibly go wrong goes wrong it

usually turns out to be impossible to get at or repair.”

Douglas Adams

Author of ‘The Hitchhikers Guide to the Galaxy’

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