Report of the Chamberlain
The Board considered a report of the Chamberlain reviewing the Financial Investment Board’s risk register. The Chamberlain introduced the report and advised the Board of amendments made to the risk register following the previous meeting, concerning asset pooling, cybersecurity and responsible investment. The Chamberlain advised of corrections on page 35 to the target risk rating and score where this did not appear in the table.
A Member asked the Board whether their targets could be more ambitious, given all but one current risk rating was currently at target, and whether the Board might consider producing a statement on risk appetite. The Chamberlain responded that identified risks were mitigated as much as possible, and risk and target would sometimes be similar. The Board could consider devising a statement on risk appetite, and as the risk register was managed by the Board, Members could make further changes if desired. The Chairman added that the nature of the Board’s work meant that scores tended to be consistent.
In response to a query from a Member, the Chamberlain advised that cybersecurity was a major corporate risk, managed by the Audit and Risk Management Committee, and the risk managed by the Financial Investment Board was a smaller part of this general risk. Whilst the Board oversaw assets, there was a robust mitigation against impersonation or other fraud, as asset changes could not be made without committee approval and multiple signatories.
Members discussed whether the risk relating to Insufficient cash might need to be reviewed, in light of proposals for borrowing in the near future and the Fundamental Review. The Board then discussed responsible investment risk relating to Environmental, Social and Governance (ESG) factors, including how this was measured and distinctions within this category. A Member cited the example of Royal Dutch Shell, who had a good ESG rating as a company, but still might be considered an inappropriate investment, and asked whether these considerations were captured sufficiently, giving regard to public perception as well as the market. A Member suggested adding reference to ethical investment as part of the risk. Mercer advised that in their view carbon risk was incorporated within ESG, but the wording on the risk register could be changed to make this more explicit if desired.
The Chairman advised that this could be taken away for consideration. The Chamberlain added that officers could review this area and bring something back to a future meeting.
RESOLVED – That the Financial Investment Board note the amended risks and actions for the Financial Investment Board’s revised Risk Register and confirm that appropriate control measures are in place.