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Material Issues and Risk Management

Our most material social and environmental risks and opportunities are captured and managed within our existing Material Risk categories (as the table below shows). There is also a clear link between our Material Risks and the challenges arising from the external environment in which we operate.

A full list of ANZ’s Material Risks is available on page 38 of the 2018 Annual Report.

Material risk type

management of material risks

most material issues

Material risk type

Compliance risk

The risk of failure to act in accordance with laws, regulations, industry standards and codes, internal policies and procedures and principles of good governance as applicable to ANZ’s businesses.

management of material risks

Key features of how we manage Compliance Risk as part of our Operational Risk framework include:

  • centralised management of key obligations, and emphasis
    on identifying changes in regulations and the business environment, so as to enable us to proactively assess emerging compliance risks and implement robust reporting and certi cation processes.
  • recognition of incident management as a separate element to enhance ANZ’s ability to identify, manage and report on incidents/breaches in a timely manner.
  • the Whistleblower Protection Policy allowing employees and contractors to make con dential, anonymous submissions regarding concerns relating to accounting, internal control, compliance, audit and other matters.

most material issues

Material risk type

Operational risk

The risk of loss and/or non-compliance with laws resulting from inadequate or failed internal processes, people and/or systems, or from external events. This de nition includes legal risk, and the risk of reputation loss, or damage arising from inadequate or failed internal processes, people and systems, but excludes strategic risk.

management of material risks

We operate a three-lines-of-defence model to manage Operational Risk, with each Line of Defence having de ned roles, responsibilities and escalation paths to support e ective communication and e ective management of our operational risk. Also, we have ongoing review mechanisms to ensure our Operational Risk framework continues to meet organisational needs and regulatory requirements.

most material issues

Material risk type

Reputation risk

The risk of loss that directly or indirectly impacts earnings, capital adequacy or value, that is caused by:

  • adverse perceptions of the Group held by any of customers, the community, shareholders, investors, regulators, or rating agencies;
  • conduct risk associated with the Group’s employees or contractors (or both); or
  • the social or environmental (or both) impacts of our lending decisions.

management of material risks

We manage Reputation Risk by maintaining a positive and dynamic culture that:

  • ensures we act with integrity; and
  • enables us to build strong and trusted relationships with customers and clients, with colleagues, and with the broader society.

We have well established decision-making frameworks and policies to ensure our business decisions are guided by sound social and environmental standards that take into account Reputation Risk.

most material issues

Material risk type

Strategic risk

The risk that the Group’s business strategy and strategic objectives may lead to an increase in other key Material Risks – for example: Credit Risk, Market Risk and Operational Risk.

management of material risks

We consider and manage strategic risks through our annual strategic planning process, managed by the Executive Committee and approved by the Board. Any increase to our key Material Risks is managed in accordance with our risk management practices.

most material issues

Material risk type

Technology

The risk of loss and/or non-compliance with laws resulting from inadequate or failed internal processes, people and systems or from external events impacting on IT assets, including the compromise of an IT asset’s con dentiality, integrity or availability.

management of material risks

Consistent with the management of Operational Risk, we operate a three-lines-of-defence model to manage Technology Risk, with each Line of Defence having de ned roles, responsibilities and escalation paths to support e ective communication and e ective management of our technology risk. We also have ongoing review mechanisms to ensure our Operational Risk framework, which is also used to manage Technology Risk, continues to meet organisational needs and regulatory requirements.

most material issues

STAKEHOLDER ENGAGEMENT What matters most