Enterprise Risk Management at Lloyds TSB
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Case Details:
Case Code : ERMT-022
Case Length : 23 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Lloyds TSB
Industry : Banking and Insurance
Countries : UK
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
Overview of Risks Contd...
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Customer Treatment Risk
This was the risk of financial loss or reputational damage arising from
inappropriate or poor customer treatment. Service improvements were monitored by
customer satisfaction surveys. The results of the research were fed into the
Group's CARE Index, which measured ongoing performance against five principal
objectives: customer understanding; accessibility; responsibility; expertise;
and overall service quality improvement...
Operational Risk
This was the possibility of loss resulting from inadequate or failed internal
processes, people and systems, or from external events. For internal purposes,
reputational impact was also included...
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Legal and Regulatory Risk
Lloyds TSB faced the risk of loss or damage arising from failure to comply with
the laws, regulations or codes applicable to the financial services industry.
Each Group business had a nominated individual with 'Compliance Oversight'
responsibility under FSA rules...
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Credit Risk
Essentially, this was as the possibility of loss arising from counterparty
default. All business units were required to operate an authorized rating system
that complied with the Group's standard methodology. The Group used a 'Master
Scale' rating structure with ratings corresponding to the probability of future
default. Group businesses identified and defined portfolios of credit and
related risk exposures and the key benchmarks, behaviors and characteristics by
which those portfolios were managed. Regular portfolio monitoring reports were
produced for review by Group Risk Management... |
Market Risk
Loss could arise from unexpected changes in financial prices, including interest
rates, exchange rates, bond, equity and commodity prices. The Group's banking
activities exposed it to the risk of adverse movements in interest rates or
exchange rates...
Insurance Risk
Lloyds TSB defined this risk as the possibility of loss arising from the
sensitivity of profits to movements in claims experience and expectation;
movements in the market value of invested assets which were not matched by
similar movements in the value of liabilities; the presence of options and
guarantees in insurance products; and changes in the legal, regulatory and
fiscal environment...
Financial Risk
The international standard for measuring capital adequacy was the risk asset
ratio, which related to on- and off-balance sheet exposures weighted according
to broad categories of risk. The Group's capital ratios, calculated in line with
the requirements of the Financial Services Authority (FSA) were a key factor in
the group's budgeting and planning processes...
Exhibits
Exhibit I: Lloyds Financial Highlights
Exhibit II: Lloyds Balance Sheet and Capital Ratios
Exhibit III: Lloyds Business Segment Highlight
Exhibit IV: Lloyds UK Retail Banking and Mortgages
Exhibit V: Lloyds Insurance and Investment Highlights
Exhibit VI: Lloyds Wholesale Market Highlights
Exhibit VII: Lloyds Investment Banking Highlights
Exhibit VIII: Lloyds Net Interest Income Highlights
Exhibit IX: Lloyds Other Income Highlights
Exhibit X: Lloyds Operating Expenses Highlights
Exhibit XI: Lloyds Capital Ratios Highlights
Exhibit XII: Lloyds Consolidated Income Statement
Exhibit XIII: Lloyds Consolidated Balance Sheet Statement
Exhibit XIV: Lloyd's Bank Stock Price Movement
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