Operational risks
To ensure the proper execution of FMO's operations, several
tools are in place. Our internal audit function assesses the
effectiveness and efficiency of the processes based on a risk
analysis. FMO's directors also perform annual operational risk
self-assessments, which evaluate controls and set action plans to
improve these controls. Follow-up on the action plans and audit
findings is carried out quarterly.
If operations have not functioned properly, we record an
incident. Each quarter, an overview of incidents is reported to
FMO's Management Board. The Audit & Risk Committee
is also informed of such incidents via a report by the Audit,
Compliance & Control department (ACC). This report gives
insight, for instance, into aspects that need to be improved and
where FMO's key risks lie.
In terms of FMO's operations, the proper execution of our
processes carries the greatest risks. We have intensively reviewed
and improved all process descriptions, which are accessible to
everyone via the intranet. Process descriptions are reviewed and
updated yearly. Knowledge of procedures and processes remains an
important priority, especially when changes in regulations, for
example, require changes in internal procedures and processes.
Knowledge and risk awareness are also an important aspect of
management steering and control. As far as soft controls in our
organization are concerned, we will continue investing in
behavioral skills, such as awareness, coaching and maintaining
clear accountability. Attention is also paid and will continue to
be paid to interdepartmental cooperation throughout FMO.
Control of (sometimes complex) financial products can be
complicated, so in the past we implemented a Product Approval
Process. It may be, for instance, that products do not meet
clients' needs, not all risks are identified or the product cannot
be registered properly. This Product Approval Process has proven to
be a valuable tool. In 2011 we furthermore thoroughly reviewed
management of local currency derivatives. Knowledge on these
products and processes is further bundled in a so-called Knowledge
Street and communication between many stakeholders, like employees
of front office, Mid Office, Financial Markets and Risk Management,
is intensified.