Strategic Report Strategic Report Strategic Report Financial Additional Overview Strategy Performance Governance Statements Information Key purpose and responsibilities Composition of the Risk Committee The purpose of the Risk Committee is to assist the Board and meetings in fulfilling its responsibilities in relation to the oversight Our Risk Committee has a majority of Independent Non- of risk and to provide advice in relation to current and Executive Directors including a Non-Executive Chairman. potential future risk exposures. This includes reviewing The Risk Committee members are Tamaz Georgadze the Group’s risk appetite and risk profile, the desired (Chairman), Al Breach, Véronique McCarroll and the culture and how it has been embedded, assessing the Chief Executive Officer, Archil Gachechiladze. Jonathan effectiveness of the risk management framework and Muir stepped down as a member of the Risk Committee systems of internal control, and the Group’s capability on 31 December 2018. Details of attendance are on to identify and manage new types of risk. page 106. The key responsibilities of the Risk Committee are to: In addition to the members, George Chiladze, the Bank’s •support the Board to ensure that risk appetite Chief Risk Officer, attends all meetings. From time to time, and exposure are addressed as part of strategy; other members of management are invited to provide a •oversee the risk management infrastructure and deeper level of insight into key issues and developments. process, and risk exposure; In addition, non-Committee Board members are also •support the Board in monitoring risk exposure and invited to attend. Meetings of the Risk Committee the implementation of our strategy to address risk; take place prior to the Board meeting in order for the •assess, review and challenge the emerging and principal Risk Committee to report its activities and matters of risks facing the Company, including those which would particular relevance to the Board. threaten its business model, future performance, solvency or liquidity; Over the course of the year the Risk Committee considers •oversee, support and evaluate the risk management a range of reports which provide analysis of: the Group’s roles of our executive management risk team; overall risk profile using both quantitative models and risk •encourage and ensure open and broad discussion analytics; changes to the loan portfolio; key risk exposures, on perceived risk concerns and responsive efforts with detail of how they are being managed; performance to mitigate when necessary; against risk appetite; emerging and potential risks, the •assess the adequacy and quality of the risk drivers of risk throughout the Group; and analysis of management function in conjunction with the Audit stress testing scenarios and the results of stress tests Committee and the effectiveness of risk reporting and reverse stress tests. The underlying assumptions, within the Group; and methodology and results of these tests are reviewed •in collaboration with the Audit Committee, review and challenged by the Risk Committee. the principal risks and uncertainties disclosures in the Half-Year and Annual Reports, and assist with the External risks formulation of the longer-term viability statement. Discussions on the macroeconomic situation and political The principal risk categories overseen by the Risk risks took place at the Board meetings and provided Committee include credit, interest rate, currency (FX), context to the Risk Committee’s discussions on the and counterparty risks. We work closely with the Group’s management of financial risks. Weaknesses in Audit Committee to consider operational risks including neighbouring currencies weighed on Georgian Lari during cyber-security, anti-fraud and bribery controls, information 2018, pushing it to historic lows against both the US Dollar systems, compliance and financial crime. The Risk and the Euro. Looking ahead, we remain alert to the Committee also considers external risks arising possibility that weaknesses in neighbouring economies from macroeconomic issues, regional stability and will detract from economic growth in Georgia this year. regulatory changes. The credit portfolio extended its growth at c.21% in 2018, The Risk Committee’s full Terms of Reference are available with Retail Banking loans growing at c.24%. However, on our website at https://bankofgeorgiagroup.com/ the ratio of household debt to GDP remains lower than governance/documents. These were reviewed in December in most European countries. The National Bank of Georgia 2018 to reflect the requirements of the 2018 UK Corporate introduced regulations on responsible consumer lending in Governance Code. 2018. Furthermore, as part of initiatives to de-dollarise the Georgian economy, effective from 1 January 2019 all loans below GEL 200,000 must be issued in local currency only. On the back of these initiatives, we now expect the annual growth of the Retail Banking loan portfolio to be within the range of 15-20%. We do not expect further material changes from the regulatory perspective. Annual Report 2018Bank of Georgia Group PLC 127