King iii PRinCiPLES NEDBANK GROUP LIMITED for the year ended 31 December 2013

Transcription

NEDBANK GROUP LIMITED
King III
PRINCIPLES
for the year ended 31 December 2013
To be read in conjunction with the 2013 Integrated Report
Nedbank Group | King III Principles
King III Principles
Governance element
1
Nedbank status quo
ETHICAL LEADERSHIP AND CORPORATE RESPONSIBILITY
Responsible leadership
1.1
The board should provide
effective leadership based on
an ethical foundation
The Ethics Office and the Nedbank Ethics Officer provide guidance to the board and the
group with regard to best practices. The board sets the tone for the executive committee
(Exco) and staff to act ethically, and on an annual basis signs a board ethics statement.
The Directors’ Affairs Committee (DAC) and the Transformation, Social and Ethics
Committee (TSEC) are tasked with the oversight of ethical practices.
1.2
The board should ensure that
the company is and is seen to
be a responsible corporate
citizen
Nedbank has a well-formulated strategy that incorporates an integrated sustainability
strategy. The board’s conduct is governed by the Board Ethics Statement, Code of Ethics,
Corporate Responsibility Policy, Environmental Policy, Reputational Risk Policy and
Stakeholder Engagement Policy. The TSEC monitors Nedbank’s progress against the
strategy. Nedbank publishes a Human Rights Statement on the Nedbank Group website
with regard to its human rights practices implemented within the organisation. We have
appointed a staffmember to implement a Human Rights framework and strategy within
the group.
1.3
the company’s ethics are
managed effectively
The group has an ethics programme covering implementation of the Code of Conduct,
the Conflicts of Interest Policy and the Gift Policy. During 2014 a risk assessment will be
conducted by Ethics SA to establish the ethical risks in the group and appropriate
improvement initiatives to mitigate these risks.
2
BOARDS AND DIRECTORS
Role and function of the board
2.1
The board should act as the
focal point for and custodian of
corporate governance
The board, through DAC, implements and monitors the governance practices within the
group. The Chief Governance and Compliance Officer is a permanent invitee to DAC and
regularly reports to the board and the relevant committees about the state of governance
in Nedbank Group.
2.2
The board should appreciate
that strategy, risk, performance
and sustainability are
inseparable
Annual strategy and business planning sessions provide all business heads with the
opportunity to incorporate key strategic issues. The board is involved in the planning
sessions and has insight into and understanding of the interplay of risk, performance and
sustainability.
2.3
The board should provide
effective leadership based on
an ethical foundation
See principle 1.1.
2.4
the company is and is seen to
be a responsible corporate
citizen
See principle 1.2.
2.5
the company’s ethics are
managed effectively
See principle 1.3.
2.6
the company has an effective
and independent audit
committee
The board has an independent audit committee and the effectiveness of the committee is
assessed annually.
2.7
The board should be
responsible for the governance
of risk
The board is ultimately accountable for risk and, with the help of the Group Risk and
Capital Management Committee, oversees and monitors risk within the group.
2
Governance element
Nedbank status quo
2
BOARDS AND DIRECTORS (continued)
2.8
The board should be
responsible for information
technology (IT) governance
The board is ultimately accountable for the governance of information technology (IT)
and, with the help of Group Information Technology Committee (GITCO), oversees and
monitors the governance of IT in the group.
2.9
the company complies with
applicable laws and considers
adherence to non-binding rules,
codes and standards
The Nedbank Group has dedicated divisions such as Group Risk and Enterprise
Governance and Compliance to implement, monitor and report on regulatory
programmes and various supervisory codes. This function of the board is delegated to
DAC and the Group Risk and Capital Management Committee to oversee and monitor.
2.10
there is an effective risk-based
internal audit
This function of the board is delegated to the Group Audit Committee (GAC), who in turn
provides oversight for internal audit. Group Internal Audit (GIA) develops a 12-month
rolling audit plan using a risk-based methodology, taking into consideration specific
regulatory requirements pertaining to internal audit, as well as including any risks or
control concerns identified by management and the board.
2.11
that stakeholders’ perceptions
affect the company’s reputation
The board has a clear understanding of its responsibility to internal and external
stakeholders. It is part of the board agenda to discuss and debate issues around
stakeholder perceptions. The integrated report defines its stakeholder groups and the
bank’s interaction with these groups. The group has a dedicated Reputational Risk Policy,
which provides guidelines to staff to deal with reputational issues. Furthermore, Nedbank
Investor Relations deals with external stakeholders as does the Public Relations Division.
2.12
The board should ensure the
integrity of the company’s
integrated report
This function of the board is delegated to Group Strategy and the Group Audit
Committee (GAC). The integrated report is audited by an external audit company on an
annual basis as appointed by GAC.
2.13
The board should report on the
effectiveness of the company’s
system of internal controls
The Group Audit Committee, Enterprise Governance and Compliance and Group Risk
provide assurance to the board on the systems and effectiveness of internal controls.
2.14
The board and its directors
should act in the best interests
of the company
The Nedbank board acts in the best interest of the company. Furthermore, the
relationship between the bank and the major shareholder, Old Mutual plc, is governed by
the Relationship Agreement and Group Operating Manual. The group has a Code of
Conduct that applies to all directors. The Code of Conduct addresses the conflicts of
interest within the bank. The conduct of each director is also stipulated in the
appointment policy and letter of each director.
2.15
The board should consider
business rescue proceedings or
other turnaround mechanisms
as soon as the company is
financially distressed as
defined in the Companies Act,
71 of 2008
The Group Risk and Capital Management Committee monitors the liquidity of the
company.
2.16
The board should elect a
chairman of the board who is an
independent non-executive
director. The CEO of the
company should not also fulfil
the role of chairman of the
board
The current Chairman serves on the board of the group’s parent company,
Old Mutual plc, and by virtue of that fact he is not an independent chairman as
defined by the governance codes.
2.17
The board should appoint the
chief executive officer and
establish a framework for the
delegation of authority
The role and responsibility of the CEO and Chairman have been separated and
formalised. There is a formal policy, adopted by the board, that addresses delegation of
authority.
2.18
The board should comprise a
balance of power, with a
majority of non-executive
directors. The majority of
non-executive directors should
be independent
The Nedbank board comprises 13 boardmembers and 10 are non-executives. Four of the
10 are independent. The board believes that the current boardmembers are independent
of management and mind, so that shareholder interests (including minority interests)
can be protected. Tom Boardman became an independent non-executive in the first
quarter of 2014 and a process to appoint another independent non-executive director in
the place of Thenjiwe Chikane who resigned on 13 August 2013 has begun.
A lead independent non-executive director, Malcolm Wyman, was appointed on
6 May 2011. The Chairman’s performance is evaluated annually. Mike Brown is the
CEO of Nedbank and therefore has a separate function, which is formalised.
3
Governance and Ethics Review (CONTINUED)
Governance element
2
Nedbank status quo
Board appointment process
2.19
Directors should be appointed
through a formal process
(approved by shareholders)
Nedbank has a board continuity programme to address all board appointments. This
process is also incorporated into the board charter and addressed by DAC.
Director development and
development of directors should be
conducted through formal processes
2.20
The induction of and ongoing
training and development of
directors should be conducted
through formal processes
A formal induction programme is developed and organised by the Company Secretary in
conjunction with all clusters. Board education is organised through board and committee
meetings and the majority of the board have attended the programme with the Gordon
Institute of Business School (GIBS).
There were other board training programmes throughout the year.
Company Secretary
2.21
The board should be assisted
by a competent, suitably
qualified and experienced
company secretary
The Nedbank board has appointed a company secretary, Thabani Jali, and he is assisted
by a Company Secretarial Office. Thabani Jali is also the Chief Governance and
Compliance Officer and his qualifications, skills and years of service are highlighted in the
integrated report.
Performance assessment
2.22
The evaluation of the board, its
committees and the individual
directors should be performed
every year
Board evaluations are conducted annually and charters are reviewed annually. The
Nedbank board has reviewed the effectiveness of all its board committees, the board,
Chairman and Company Secretary, and have done peer reviews during 2013.
Board committees
2.23
The board should delegate
certain functions to wellstructured committees but
without abdicating its own
responsibilities
Nedbank’s board structure consists of various committees to attend to the business of
the board. In the governance and ethics review of the integrated report, this structure is
addressed.
Group boards
2.24
4
A governance framework
should be agreed between the
group and its subsidiary boards
The Nedbank Group consists of approximately 283 entities with their own boards and
relevant committees. These entities are governed by the various divisions in the group
according to standard operating processes and procedures as required by the respective
divisions. There are 191 local and foreign subsidiaries in the group. There are 64 joint
ventures, special-purpose vehicles and controlled entities. Of the local and foreign
subsidiaries 130 are active. The Enterprise Governance and Compliance Division align
governance processes with those of the main Nedbank board. Furthermore the Enterprise
Risk Management Framework governs structures and risk processes.
Governance element
2
Nedbank status quo
Remuneration of directors and senior
executives
2.25
Companies should remunerate
directors and executives fairly
and responsibly
Nedbank has a remuneration policy that is reviewed on an annual basis by the
Remuneration Committee, which is also responsible for the Remuneration Report.
The Remuneration Report is in the integrated report.
2.26
Companies should disclose the
remuneration of each
individual director and certain
senior executives
The board decided in 2010 that boardmembers are required to provide their inputs on an
ongoing basis, even when they are not able to attend a board meeting in person. Hence
they will be paid a fixed retainer fee per year rather than a fee for attendance at meetings.
The new fees are applicable from 1 July of each year, subject to approval by shareholders
at the annual general meeting.
Directors in Nedbank are paid on a cash basis only. A share-based BBBEE NED scheme
was previously in place, but this scheme was wound up during 2013.
Nedbank issues performance shares that vest in a range of 0% to 130%, depending on
two performance conditions, namely return on equity (ROE) versus cost of equity (COE)
and NED share price versus Fini 15. The applicable vesting period is three years for all
performance share allocations.
The target for the ROE performance target is that ROE (excluding goodwill) should equal
COE + 5% measured as a simple average over three financial years. This is a strong level
of corporate performance to be achieved for 100% vesting of this element and one which
is regarded as more stretching than the current targets applied by Nedbank’s major
competitors.
The target for the NED share price movement is that the NED share price should equal
the movement in the Fini 15 for 100% of the portion of the award, subject to this
condition.
For both measures there is a sliding vesting scale applicable, which is fully disclosed in
the 2013 Remuneration Report.
Nedbank makes retention share awards for the purposes of employee retention. These
vest on a cliff basis at the end of three years. There is also a cash-based deferred
short-term incentive (DSTI) scheme utilised for this purpose. All of these schemes are
fully disclosed in the 2013 Remuneration Report.
For all future long-term incentive awards from March 2014, executive directors will be
subject to performance conditions on 100% of the award (up from 50%). In this regard,
50% of the award will be subject to the ROE performance target and 50% will be subject
to the Fini 15 corporate performance target.
The Nedbank Remuneration Report is fully compliant with both the disclosure of
executive directors’ and prescribed officers’ remuneration. Further, the Remuneration
Report for 2013 now includes disclosures as set out in regulation 43 of the Banks Act,
which deal with those employees regarded as material risk-takers and senior managers.
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Governance element
Nedbank status quo
2
2.27
Shareholders should approve
the company’s
remuneration policy
3
Audit committees
3.1
the company has an
effective and independent
audit committee
The Remuneration Policy is published in the Remuneration Report, and is subject to a
non-binding advisory vote by shareholders at the annual general meeting.
The board has an independent audit committee and its effectiveness is reviewed on an
annual basis.
Membership and resources of
the audit committee
3.2
Audit committee members
should be suitably skilled and
experienced independent
non-executive directors
The Audit Committee members are three independent directors with the necessary skill
and expertise. The members are Malcolm Wyman, Mpho Makwana and Nomavuso
Mnxasana, and their diverse skills are reflected in the integrated report. Ongoing board
and committee training takes place. All directors are required to attend the GIBS training
as proposed by the South African Reserve Bank (SARB). Skills and qualifications are
assessed through board and committee evaluations on an annual basis (GAC evaluation).
The committee relies on executive directors and management, being attendees, for
guidance as required. Training takes place as per board training schedule.
3.3
The audit committee should be
chaired by an independent
non-executive director
Malcolm Wyman is an independent Chairman of the Audit Committee and is also the
Lead Independent Director.
Responsibilities of the audit committee
3.4
The audit committee should
oversee integrated reporting
GAC oversaw the Nedbank Group integrated reporting process and reviewed the audited
annual financial statements included in the integrated report. It also received reports
from the Group Transformation, Social and Ethics Committee, which reviewed the
disclosure of sustainability issues in the integrated report. The latter committee also
ensured that external assurance providers, Deloitte and KPMG, were engaged on
material sustainability issues and for reporting on the key performance indicators.
3.5
ensure that a combined
assurance model is applied to
provide a coordinated approach
to all assurance activities
Nedbank’s Enterprise Risk Management Framework (ERMF) provides the methodology
and model to implement assurance on governance, risk and compliance.
Internal assurance providers
3.6
6
satisfy itself of the expertise,
resources and experience of
the company’s finance function
The GAC reviews this at least on an annual basis as per the charter and reports on this
function in the GAC report within the integrated report.
Governance element
Nedbank status quo
3
Audit committees (Continued)
3.7
responsible for overseeing of
internal audit
To provide for the independence of GIA, the Chief Internal Auditor of the group is
accountable to the Nedbank Group Audit Committee and reports functionally to the
Nedbank Group GAC Chairman and to the Chief Executive from an administrative point
of view. Quarterly meetings are held with the GAC Chairman.
GIA submits the 12-month rolling audit plan to GAC and the Group Internal Audit
Director of Old Mutual plc for review and approval prior to the commencement of a
calendar year. All changes to the annual audit plan are submitted to GAC for approval.
GAC monitors whether the internal audit function is effective in terms of its scope, plans,
coverage, independence, skills, staffing, overall performance and position within the
organisation.
Specifically with regard to the bank’s Advanced Internal Ratings-Based (AIRB) credit
system, the following assessments are performed:
■■
■■
■■
assessment of the skills of the Group Internal Audit function with respect to the AIRB
credit system;
assessment of internal audit coverage of the AIRB credit system; and
assessment of the adequacy of the internal audit plan to cover the AIRB credit system,
including the working relationship and sharing of work with external audit.
The Institute of Internal Auditors (IIA) Standards require that an external quality
assurance review be conducted on the internal audit function at least once every five
years.
Nedbank GIA has its own quality assurance team that reviews internal audit files in
conjunction with Old Mutual plc.
3.8
an integral component of the
risk management process
The Banks Act presents specific statutory duties for the Group Risk and Capital
Management Committee (GRCMC).
GAC is not responsible for risk management. GRCMC gives feedback and assurance to
GAC and the board. External audit gives GAC assurance regarding risks and whether
these risks are mitigated. GIA has responsibility:
■■
■■
to develop a 12-month rolling audit plan using a risk-based methodology, taking into
consideration specific regulatory requirements pertaining to internal audit, as well as
including any risks or control concerns identified by management and the board. The
key functions of the GAC are to assist the board in its evaluation of the adequacy and
efficiency of the internal control systems, accounting practices, information systems
and auditing processes applied within the group in the day-to-day management of its
business; and
with regard to internal control, to monitor that management creates and maintains an
effective internal control environment throughout the group, and that management
demonstrates and stimulates the necessary respect for this. It also monitors the
identification of weaknesses and breakdown of systems and internal controls.
External assurance providers
3.9
The audit committee is
responsible for recommending
the appointment of the external
auditor and overseeing the
external audit process
The GAC report provides for this as per the charter.
Reporting
3.10
report to the board and
shareholders on how it has
discharged its duties
The GAC report is included in the integrated report.
7
Governance element
4
Nedbank status quo
The governance of risk
The board’s responsibility for risk
governance
The board is responsible for risk management and delegates this function to GRCMC to
oversee and monitor. A log is developed to reflect all risk issues and this is discussed at
the respective board committee meetings. An annual risk strategy is prepared and
proposed at board level. The Regulation 40 letter addresses various risk matters and the
state of risk in the organisation. This report is submitted to the SARB on an annual basis.
4.1
The board should be
responsible for the governance
of risk
4.2
The board should determine the GRCMC measures various performances against set risk limits or guidelines.
levels of risk tolerance
4.3
The risk committee or audit
committee should assist the
board in carrying out its risk
responsibilities
GRCMC meets four times a year as a minimum to provide the board with assistance in
carrying out the risk duties.
Management’s responsibility for risk
management
4.4
The board should delegate to
management the responsibility
to design, implement and
monitor the risk management
plan
Risk as an enabler is one of the strategic focus areas of Nedbank. This cascades into
management scorecards and is tracked at monthly meetings. The IT system solution for
the Advanced Measurement Approach (AMA) for operational risk is SAS, which is used
groupwide to manage and monitor various risks effectively. The Enterprise Risk
Committee (ERCO) processes enable and obligate managers to monitor risk in their
areas and report it.
Risk assessment
4.5
Since 2009 Nedbank’s strategy and business planning process has included a formal risk
risk assessments are performed planning component.
on a continual basis
Risk and control assessment is ongoing in the form of the Risk Control Self-assessment
(RCSA). The RCSA process was introduced in 2009 and is embedded in the organisation.
Risks are documented in the:
4.6
frameworks and methodologies
are implemented to increase
the probability of anticipating
unpredictable risks
■■
Key Issues Control Log (KICL);
■■
CEO reporting pack;
■■
Strategy and business plan; and
■■
Quarterly reporting to Old Mutual plc.
The Enterprise Risk Management Framework establishes formal governance, procedures
and processes for all risks, both known and unpredictable.
Quarterly risk committee meetings take place throughout Nedbank business in all
monolines, business units, divisions and clusters to assess all risks on a continual basis.
GRCMC facilitates discussion by members.
Risk response
4.7
management considers and
implements appropriate
risk responses
This is a requirement that is achieved through the implementation of the risk strategy,
the RCSA and risk assessments conducted during the strategy and business planning
processes.
Risk monitoring
4.8
8
The board should ensure
continual risk monitoring by
management
This is demonstrated through the ERMF and ERCO processes. Regulations 39/40 and 43
reports are submitted to the SARB and address monitoring. Periodic gap analysis is
undertaken against Regulation 39 to ensure all aspects are accounted for.
Governance element
4
Nedbank status quo
The governance of risk (CONTINUED)
Risk assurance
4.9
The board should receive
assurance regarding the
effectiveness of the risk
management process
A good risk culture is strongly endorsed by the CE in the Nedbank Strategic Framework
(Dagwood). One of the 10 Deep Green aspirations is to be worldclass at risk
management
On an annual basis GAC provides an assurance report to the board and in the integrated
report on risk management processes.
Risk disclosure
Adequate and effective disclosure is made in the integrated report.
4.10
there are processes in place
enabling complete, timely,
relevant, accurate and
accessible risk disclosure
to stakeholders
5
The governance of information technology
5.1
The board should be
responsible for information
technology (IT) governance
The board is ultimately accountable for the governance of information technology (IT)
and, with the help of the Group Information Technology Committee (GITCO), oversees
and monitors the governance of IT in the group.
This requirement is currently fully met within the current Nedbank IT governance
structures. Primary governance forums include the Group IT Committee with links to
audit and risk committees, the Executive IT Committee, cluster representation at IT
ERCO’s, Project Steering Committees, Prioritisation Forums and Project Review Board.
The financial component of IT is managed independently by the Group Finance Division.
5.2
IT should be aligned with the
performance and sustainability
objectives of the company
The IT strategy process incorporates an assessment of IT assets (asset health checks are
done with business users and include a business as well as a technical perspective),
application roadmaps (typically a three-year view compiled with the relevant business
unit to ensure its aspirations are included), and infrastructure roadmaps (these
incorporate anticipated technology changes and strategies). These, plus a scan in the
environment and competitors, form the basis of the Group Technology (GT) Strategic
Plan. The GT Strategic Plan is tabled, discussed and approved annually by both Group
and Executive IT Committee (EITCo).
The innovation process is facilitated by GT, but driven by business units in terms of
prioritisation and decisionmaking. The result and shape of the innovation pipeline is
tabled and reviewed/approved by Executive and Group IT Committees at each meeting.
5.3
management the responsibility
for the implementation of an IT
governance framework
The Nedbank IT governance framework takes direction from Group Risk and
encapsulates the principles, policies and standards as prescribed. Most relevant to IT are
the Enterprise Risk Management Framework (ERMF), Operational Risk Management
Framework and Enterprise Governance and Compliance Frameworks. These are
supported by:
■■
structures (Group IT Committee, Executive IT Committee, Executive Committee,
Opcom, ERCOs and GT Exco);
■■
policies (IT Management, Innovation and Data, Information Security); and
■■
relevant standards and processes that are subject to audits, reviews and benchmarks.
The mandates and relationships between GAC, the Group Risk Committee and the Group
IT Committee are documented in the respective charters. The Group IT Committee is
the IT Steering Committee (King III) of Nedbank intranet charters.
5.4
The board should monitor and
evaluate significant IT
investments and expenditure
The Group IT Committee agenda in the main covers operational feedback, benchmark
results, project feedback, including business case and ROI information, project finance,
risk, strategy and outsourcing.
9
Governance element
Nedbank status quo
5
The governance of information technology (CONTINUED)
5.5
IT should form an integral part
of the company’s
risk management
Various IT systems are used to manage risks effectively within the bank. Some of these
include the Payment Association SA (PASA), which is the most regulated in terms of
disaster recovery capability and is used as a barometer for the IT disaster recovery
capability.
Business Continuity Management for all clusters addresses the continuation of IT
systems and business processes should events occur that would disenable processes and
IT systems.
Four PASA tests are conducted per year, one of which is subject to External Audit review.
GIA follows a risk-based methodology and would include PASA testing in the annual
audit plan. However, should there be key emerging risk in other areas of the business, we
may not perform the audit.
5.6
information assets are
managed effectively
The Group IT Committee is the final approver of the Nedbank Information Security Policy
as well as the Enterprise Data Management Policy. These policies are reviewed, like all
other level 3 policies, on an annual basis.
The external audit control benchmark includes sections covering the key aspects of
information security. This is published at each Executive and Group IT Committee
meeting. All key audit findings (external and internal) are published and discussed at the
IT Committee meetings. Over and above key findings, matters relating to reputational
risk are also discussed at IT Committee meetings when required – these range from
phishing, malware protection, data leak prevention, antivirus to access control (intranet
policies). The data governance project also addresses this issue.
All data breaches with negative or potential negative reputational impacts are reported
to the Executive and the Group IT Committees. As with all other severities, these are
investigated, root causes identified and resolved. Details of all severities are published at
the Executive and Group IT Committee meeting – this is over and above normal line
management reporting.
The requirements of the Protection of Personal Information Act (POPIA) may require
enhanced reporting. A POPIA gap analysis has been conducted by
PricewaterhouseCoopers (PwC).
GIA submits a report on a quarterly basis to GITCO on key audit issues raised.
5.7
10
A risk committee and audit
committee should assist the
board in carrying out its IT
responsibilities
The roles and mandates between the GRCMC and the Group IT Committee are clear,
documented and have been in place for a number of years. Key IT-related issues are
captured and managed like any other key issue in the Nedbank Key Issues Control Log.
The Group IT Committee manages all IT systems and reports to the Audit Committee
and the board. Minutes are discussed and monitored as part of the GAC charter.
Governance element
Nedbank status quo
6
Compliance with laws, rules, codes and standards
6.1
the company complies with
applicable laws and considers
adherence to nonbinding rules,
codes and standards
The Nedbank Risk Appetite Policy makes provision for zero tolerance for compliance risk.
The board-approved Compliance Policy takes this even further and mandates compliance
with all regulatory requirements.
The board and each individual
director should have a working
understanding of the effect of
the applicable laws, rules,
codes and standards on the
company and its business
External education through GIBS and internal education with the various committees are
conducted with the board and the various committees. Experts on applicable law are
requested to present to the board.
Compliance risk should form an
integral part of the company’s
risk management process
The EGC framework makes provision for the compliance risk management procedure.
6.2
6.3
The monitoring of compliance is done via business unit compliance officers, EGC and
submitted to the Directors’ Affairs Committee. The board applies King III principles and
the UK Code of Corporate Governance principles and these are monitored within the
various board and Exco subcommittees. EGC, with the business unit compliance officers,
is responsible to drive compliance with laws, rules and codes within the group.
A quarterly regulatory update is communicated to the DAC by EGC to ensure that the
directors are familiar with the general content of applicable laws, rules, codes and
standards to discharge their legal duties.
This procedure details the identification, assessment, management, control, monitoring
and reporting of compliance risk via the various governance structures, including the
Group Opcom, ERCO processes, DAC and the board committee.
Enterprise Governance and Compliance is the independent function as established in
accordance with section 60B and Regulation 49 of the Banks Act, 94 of 1990.
6.4
management the
implementation of an effective
compliance framework and
processes
The Compliance Policy is a board-approved policy being implemented across the group.
Computer-based training is implemented across the group and addresses key
governance and compliance processes. Every staffmember is required to do this training
once they are employed, with a pass rate of 80% being required.
An independent compliance function has been established as a separate cluster of the
bank and is headed by an Executive Head, ie the Chief Governance and Compliance
Officer, who is an invitee and/or member of various executive management committees
and board committees.
A requirement of the Banks Act is that compliance is a separate function to risk, but that
Compliance works closely with Risk with regard to combined assurance. Every business
unit has a compliance head with compliance officers reporting into the head of the
cluster.
11
Governance element
7
Nedbank status quo
Internal audit
The need for and role of internal audit
7.1
there is an effective risk-based
internal audit
The purpose of GIA is to provide independent, objective assurance to the Nedbank Group
board of directors via GAC that the governance processes, management of risk and
systems of internal control are adequate and effective to mitigate the most significant
risks, both current and emerging, that threaten the achievement of the group’s objectives,
and in so doing help improve the control culture of the group.
GIA receives its authority from GAC, which is a committee of the board of Nedbank
Group established, among other things, to review the work of the internal auditors of
Nedbank Group and its subsidiaries and to evaluate the adequacy and effectiveness of
the group’s financial, operating, compliance, and risk management controls.
GIA will comply with the International Standards for the Professional Practice of Internal
Auditing of the Institute of Internal Auditors (IIA), including the IIA’s Code of Ethics
and the co-developed Nedbank and Old Mutual Group Internal Audit Methodology.
The IIA standards and code of ethics are embedded in the co-developed Nedbank and
Old Mutual Group Internal Audit Methodologies and Internal Audit Charter.
All work is required to be performed in line with the methodologies and charter.
GIA maintain a quality assurance programme to confirm adherence to the
methodologies.
GIA will maintain a quality assurance programme to confirm adherence to IIA standards.
Internal audit’s approach and plan
7.2
Internal audit should follow a
risk-based approach to its plan
The objective and scope of work of GIA is to determine whether the group’s systems of
internal control, risk management and governance, as designed and operated by
management, are adequate and effective.
The scope of GIA’s work is determined by the key risks facing the group and the
requirements of the GAC, subsidiary audit committees and the group and subsidiary
executive committees.
GIA has responsibility to develop a 12-month rolling audit plan using a risk-based
methodology, taking into consideration specific regulatory requirements pertaining to
internal audit, as well as including any risks or control concerns identified by
management and the board.
7.3
Internal audit should provide a
written assessment of the
effectiveness of the company’s
system of internal controls
and risk management
GIA reports on a quarterly basis to the GAC summarising the results of internal audit
activities. With effect from January 2013, GIA provides GAC with a written assessment
on the system of internal controls and risk management. This assessment will be
provided on an annual basis.
7.4
responsible for overseeing
internal audit
An evaluation in line with the Institute of Directors practice note. ‘Example of an
evaluation of Internal Audit’, was not performed for the 2013 financial year.
However, Internal Audit was subject to evaluation by: a) the business through a Key
Stakeholder Survey; b) internal/external quality review and c) ‘Self Assessment with
external Validation’ by March 2012. (The IIA Standard require that an external
assessment is performed every five years.)
GAC is responsible for monitoring that the internal audit function is effective, in terms of
its scope, plans, coverage, independence, skills, staffing, overall performance and position
within the organisation.
12
Governance element
7
Nedbank status quo
Internal audit (continued)
Internal audit’s status in the company
7.5
Internal audit should be
strategically positioned to
achieve its objectives
To provide for the independence of GIA the Chief Internal Auditor of the group is
accountable to the Nedbank Group Limited Audit Committee, reports functionally to the
GAC Chairman and administratively to the CE of the group.
Financial independence, essential to the effectiveness of internal auditing, is provided by
GAC approving a budget for GIA to allow GIA to meet the requirements of its charter.
GIA is functionally independent from the activities audited and the day-to-day internal
control processes of the organisation and must be able to conduct an assignment on its
own initiative, with free and unfettered access to people and information, in respect of
any relevant department, establishment or function of the organisation, including the
activities of branches and subsidiaries and outsourced activities as stated in the charter.
The Chief Internal Auditor and GIA staff are authorised to:
■■
■■
■■
■■
have unrestricted access to all functions, records, property and staff of the group in the
course of fulfilling their responsibilities – subject to the confidentiality of information,
access may be restricted to the Chief Internal Auditor;
have full and free access to the GAC and attend and participate in audit committee
meetings of business entities within the group;
allocate resources, set frequencies, select subjects, determine scope of work, and
apply techniques required to accomplish internal audit objectives; and
obtain the necessary assistance of staff in business units of the organisation where
they conduct audits, as well as specialised services from within or outside the group.
13
Governance element
Nedbank status quo
8
Governing stakeholder relationships
8.1
that stakeholders’ perceptions
affect a company’s reputation
Shareholders’ perceptions are closely managed and investors are surveyed from time-totime. There are face-to-face interactions with stakeholders to gauge perceptions. The
broker consensus on earnings is monitored and reported in the Chief Executive’s Report.
Investor and analyst feedback is given on the annual and interim results and investor
roadshows are presented to the board. Nedbank’s relative share price, market
capitalisation and net asset value graphs, analyst forecasts, competitor forecasts,
shareholders’ analysis, strategic insight and peer comparisons are also discussed in the
CEO Report. The integrated report is viewed and discussed at board level and this
includes stakeholder engagements.
management to proactively
deal with stakeholder
relationships
An external communication policy and a stakeholder engagement policy are maintained
by Investor Relations and Group Communications.
8.3
The board should strive to
achieve the appropriate balance
between its various stakeholder
groupings, in the best interests
of the company
Shareholder interests are appropriately considered. For example, the acquisitions of the
Old Mutual joint ventures (JVs) and outstanding 48% shareholding in Imperial Bank
were well-received as these are considered to be enhancing group economic profit
through improving cross-sell ratios. The purchase consideration for the Old Mutual JVs in
2009 was in shares and did not affect capital adequacy ratios, while the Imperial Bank
acquisition in 2010 was made through cash payments as the group’s capital ratios had
further strengthened the following year.
8.4
Companies should ensure the
equitable treatment
of shareholders
Broad communication measures include specific newspapers such as The Sowetan
newspaper, which provides access to our broad Black Economic Empowerment (BEE)
shareholder base, ensuring that minority shareholders are taken into account.
8.5
Transparent and effective
communication with
stakeholders is essential for
building and maintaining their
trust and confidence
Nedbank has an External Communications Policy and communication of results takes
place in English and Afrikaans.
8.2
Mechanisms and processes are in place for constructive communication with investors,
analysts and potential investors. The board receives feedback and reports on
engagement with the investment community. Members of the board are present at the
annual general meeting, where shareholders and stakeholders are present.
Dispute resolution
8.6
disputes are resolved as
effectively, efficiently and
expeditiously as possible
Disputes are resolved in conjunction with the Banking Ombudsman, Financial Service
Board, and the National Credit Regulator to mention a few. Internally, Nedbank has the
Nedbank Contact Centre for clients while for staff there is the Ethics Committee and the
grievance procedure.
There are appropriate representatives in place, ie Group Legal, IR specialist and the
Executive General Manager for client services.
9
Integrated reporting and disclosure
Transparency and accountability
9.1
The board should ensure the
integrity of the company’s
integrated report
All boardmembers review the integrated report content and assume responsibility for the
final approval of content. The Sustainable Development Performance data is specifically
reviewed by the Transformation, Social and Ethics Committee, which recommends
approval to GAC. GAC specifically reviews and approves the financial data and
recommends approval to the board committee. The integrated report contents are
independently assured by external auditors.
9.2
Sustainability reporting and
disclosure should be integrated
with the company’s financial
reporting
The integrated report includes all sustainability reporting and disclosure.
9.3
Sustainability reporting and
disclosure should be
independently assured
The sustainability data, as included in the integrated report, is independently assured by
external auditors. The Audit Committee reviews the external auditor requirements.
14

King iii PRinCiPLES NEDBANK GROUP LIMITED for the year ended 31 December 2013

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