Prudential Regulation Authority Rulebook

3.1

1. (1) A firm that is significant must establish a risk committee composed of members of the management body who do not perform any executive function in the firm. Members of the risk committee must have appropriate knowledge, skills and expertise to fully understand and monitor the risk strategy and the risk appetite of the firm.
2. (2) The risk committee must advise the management body on the institution's overall current and future risk appetite and assist the management body in overseeing the implementation of that strategy by senior management.
3. (3) The risk committee must review whether prices of liabilities and assets offered to clients take fully into account the firm’s business model and risk strategy. Where prices do not properly reflect risks in accordance with the business model and risk strategy, the risk committee must present a remedy plan to the management body.

[Note: Art. 76(3) of the CRD]

3.2

1. (1) A firm must ensure that the management body in its supervisory function and, where a risk committee has been established, the risk committee have adequate access to information on the risk profile of the firm and, if necessary and appropriate, to the risk management function and to external expert advice.
2. (2) The management body in its supervisory function and, where one has been established, the risk committee must determine the nature, the amount, the format, and the frequency of the information on risk which it is to receive.

[Note: Art. 76(4) of the CRD]

3.3

In order to assist in the establishment of sound remuneration policies and practices, the risk committee must, without prejudice to the tasks of the remuneration committee, examine whether incentives provided by the remuneration system take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

[Note: Art. 76(4) of the CRD]

3.4

1. (1) A firm’s risk management function (2.5) must be independent from the operational functions and have sufficient authority, stature, resources and access to the management body.
2. (2) The risk management function must ensure that all material risks are identified, measured and properly reported. It must be actively involved in elaborating the firm’s risk strategy and in all material risk management decisions and it must be able to deliver a complete view of the whole range of risks of the firm.
3. (3) A firm must ensure that the risk management function is able to report directly to the management body in its supervisory function, independent from senior management and that it can raise concerns and warn the management body, where appropriate, where specific risk developments affect or may affect the firm, without prejudice to the responsibilities of the management body in its supervisory and/or managerial functions pursuant to the CRD and the CRR.

[Note: Art. 76(5) of the CRD]

3.5

The head of the risk management function must be an independent senior manager with distinct responsibility for the risk management function. Where the nature, scale and complexity of the activities of the firm do not justify a specially appointed person, another senior person within the firm may fulfil that function, provided there is no conflict of interest. The head of the risk management function must not be removed without prior approval of the management body and must be able to have direct access to the management body where necessary.

[Note: Art. 76(5) of the CRD]