Legal & General Group Plc L&G FY 2014 Results -10-
04 März 2015 - 8:01AM
UK Regulatory
insurance products. Regulatory and regulation. With regard
actions may also lead to to Solvency II, the capital
changes to the regulatory that we will be required to
and legislative environment hold will not be certain until
in which we operate. PRA agreement of our internal
model, with the risk that
the final outcome results
in a lower capital surplus
than under Solvency I. There
are also challenges in ensuring
that regulatory interpretation
of the new rules is proportionate
and cost effective for the
insurance sector. In terms
of consumer regulation, there
remains a need for greater
regulatory certainty to providing
consumer guidance and addressing
the advice gap in a post Retail
Distribution Review and an
increasingly digital world.
We remain vigilant to the
risk that future legislative
and regulatory change may
have unintended consequences
for the sectors in which we
operate. We seek to actively
participate with Government
and regulatory bodies in the
UK and Europe to assist in
the evaluation of change so
as to develop outcomes that
meet the needs of all stakeholders.
Internally, we evaluate the
impact of all legislative
and regulatory change as part
of our formal risk identification
and assessment processes,
with material matters being
considered at the Group Risk
Committee and the Group Board.
We maintain a flexible distribution
model to respond to changing
market trends.
The Group may not maximise As a significant participant
opportunities from structural in the long-term savings and
and other changes within insurance markets, we are
the financial services sector, exposed to changes in consumer
adversely impacting future sentiment. We are also exposed
earnings. to increased costs of regulatory
Significant changes in the compliance through regulatory
markets in which we operate and legislative responses
may require the review and to events in the financial
realignment of elements of services sector. Recent examples
our business strategy. A include requirements for central
failure to be sufficiently clearing of certain derivative
responsive to potential change instruments, which would increase
and understand the implication the costs associated with
to our businesses, or the pension savings products and
incorrect execution of change annuities, respectively.
may impact the achievement
of our strategic objectives. We actively manage our brand
and seek to differentiate
our business model from that
of our competitors, focusing
on our customers' needs through
a diversified portfolio of
risk, savings and investment
businesses. We also actively
engage with our regulators
to support understanding of
the risk drivers in the markets
in which we operate, and highlight
matters where we believe the
industry needs to change.
A material failure in our
business processes may result Macro trends in the markets
in unanticipated financial in which we operate remain
loss or reputation damage. those of an ageing population;
We have constructed our framework reform in the provision of
of internal controls to minimise state welfare; retrenchment
the risk of unanticipated by the banks; the globalisation
financial loss or damage of asset markets; and the
to our reputation. However, increasing use of digital
no system of internal control technologies. Responding to
can completely eliminate these trends potentially creates
the risk of error, financial people and change risks, such
loss, fraudulent actions as organisational challenges
or reputational damage. and management stretch across
the range of initiatives.
Regulatory changes and political
risks may also present complexity
in delivering our responses.
We've defined clear strategies
to respond to the macro trends.
We monitor as part of our
on-going risk review processes
factors that may impact our
responses to these macro trends
and seek to ensure appropriate
risk mitigation plans are
put in place.
Our plans for growth inherently
The financial services sector will increase the profile
is increasingly becoming of operational risks across
a target of 'cyber-crime'. our businesses. We continue
As we and our business partners to invest in our system capabilities
increasingly digitalise our and business processes to
businesses, we are inherently ensure that we meet the expectations
exposed to the risk that of our customers; comply with
third parties may seek to regulatory, legal and financial
disrupt our on-line business reporting requirements; and
operations, steal customer mitigate the risks of loss
data or perpetrate acts of or reputational damage from
fraud using digital media. operational risk events.
A significant cyber-event
could result in reputation Our "three lines of defence"
damage and financial loss. risk governance model seeks
to ensure that business management
are actively engaged in maintaining
an appropriate control environment,
supported by risk functions
led by the group chief risk
officer, with independent
assurance from Group Internal
Audit.
The financial services sector
continues to see attempts
by third parties to seek and
exploit perceived vulnerabilities
in IT systems. Potential threats
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