Page 38 - 86395_CCB - 2024 Annual Report (web)

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Emerging Risks and Uncertainties
The Bank regularly reassesses the key risks to which it is exposed including any which are emerging, within the
environment in which it operates. The Bank’s emerging risks during 2024 and at the time of the preparation of this
document are assessed to be:

Emerging Risk Definition The Bank's Response
Global Macro‑ The current geopolitical events in the The Bank monitors a range of current and
economic world, including several international forward‑looking measures covering all risk types
outlook conflicts and the recent elections in (primarily operational, conduct, strategic, and credit).
the UK and US, continue to cause These are reviewed by Management and oversight
ongoing uncertainties. Additionally, forums on an ongoing basis, and appropriate
these conflicts could lead to increased responsive action undertaken. In mitigation to
commodity and supply costs, as well as more severe scenarios, documented arrangements
supply‑chain disruption, which could are in place for each of the Bank’s ‘Important
cause additional economic headwinds Business Services’, and for each business area,
for the UK economy, noting that UK identifying key points of failure and Management's
interest rates remain high compared contingency arrangements.
to recent times.
UK Macro‑ The geopolitical events and other Macro‑economic risk is considered as part of
economic economic challenges, such as cost of the Strategic Planning process and monitored via
Risk living/inflationary pressures, continued reporting to Board and executive level committees.
higher interest rates and reduced The Bank continues to support its customers and
levels of investment continue. There develop its lending policy to ensure it remains
remains some risk of ongoing economic appropriate to changing circumstances. The Bank
uncertainties, impacting the Bank and its has recently joined the Lending Standards Board.
customer base, resulting in the potential
for the Bank being unable to achieve its
business targets – both growth as well
as increased Credit Risk, as borrowers
see continued higher interest rates.
Delivery of The risk that pursuing the business The Bank made significant investment in process
the 2024+ growth targets outlined in the current capability during 2023 and 2024 and continues to
Growth Plan Strategic Plan will bring additional monitor external events to ensure its credit policy
operational pressures and create remains appropriate. Regular reporting of Key Risk
increased risk, either Credit Risk or Indicators is provided to both Management and
Operational/Fulfilment Risk. the Board, to ensure it remains within Risk Appetite
using its Risk Management Framework. Significant
resource is dedicated to operational management and
oversight. Resource planning helps the Bank ensure it
recruits sufficient resources/skills to manage the risk
and quarterly reforecasting is undertaken.

Climate Climate Change is a growing risk, Both physical and transitional risks are being factored
Change and ongoing consideration needs to into Risk Appetite, Key Risk Indicators, and broader
be given to the longer‑term impacts, lending activity. This is a topic that the Bank takes
particularly in relation to the property very seriously and has conducted a detailed report in
loan portfolio. If left unchecked, it could response to the PRA’s Climate Change Requirements
lead to a medium/long term risk to and plans for firms to manage these risks. The
the credit quality of the book because Environmental, Social & Governance (ESG) Steering
of extreme climate events such as Committee, chaired by the Bank’s General Counsel
flood risk and poor preparedness and supported by the Chief Risk Officer, continues
and lack of attention given to this to develop action plans, in addition to working with
risk by the property industry (which external bodies, such as UK Finance, to assess sector
continues to see weaker EPC ratings), preparedness, planning and actions to ensure the
as the UK Economy works towards Bank’s initiatives remain appropriate and relevant,
Net Zero by 2050. Consideration has keeping a watching eye on new legislation. Regular
also been given to the Asset Finance progress reports are provided to key stakeholders,
and Classic Vehicles and Sports Cars including the Board and Management plan to hold
(CV&S) portfolios albeit this is currently several scenario planning workshops in the next
considered less material. 12 months.