§ Mr. McNultyTo ask the Secretary of State for Trade and Industry what plans he has to review the way in which ECGD assesses risk. [85820]
§ Mr. ByersMy hon. Friend the Financial Secretary and I have agreed, in view of recent global economic turmoil and its adverse impact on ECGD's ability to meet its financial objective, to put in train an independent review of ECGD's Risk Management systems and processes.
The Terms of Reference for the Risk Management Review are:
To assist Her Majesty's Government in assessing the adequacy of risk management systems and processes of the Export Credits Guarantee Department, within the context of the Department's Mission and Financial objective. Specifically, the Consultants are required:
199WTo assess the adequacy and robustness of the systems used by ECGD to assess, monitor and manage political and country risk. ECGD uses its Portfolio Management System (PMS) to assess and manage country risk exposure. In conjunction, it operates risk monitoring systems and statistical models to assess the likelihood of longer term break-even. Are there measures which could be taken to improve these systems?To assess the adequacy and effectiveness of ECGD's operational controls in relation to its systems for assessment and management of political and country risk, having regard to best commercial practice. ECGD's activities are governed by a set of operational controls, involving delegated authorities from the Treasury as well as internal delegated authorities, coupled with checks and balances to ensure that risk assessments are kept separate from decisions on cover availability and premium for particular markets. Could these operational controls be improved?In the light of these assessments to make recommendations for strengthening ECGD's risk management systems and operational controls.In undertaking this assignment, the Consultant should have regard for best commercial practice in risk management in the financial services market, in particular banking and insurance practices, in the public and private sectors.
The systems, controls and procedu res relating to the management of political and country risk to be reviewed will include:
Within ECGD, the market and portfolio controls represented by the Portfolio Management System and the role of the Market Committee (including the Amber Zone Budget and Amber Zone Delegated Authorities);The allocation of roles and responsibilities for risk management and underwriting in ECGD and to consider whether the risk management function has sufficient authority;Outside ECGD, the roles of the Export Guarantees Advisory Council, the Whitehall Economic Sub Group (ESG), the Export Guarantees Committee (EGC) and of other Departments;The adequacy and robustness of management information available to underpin ECGD risk management decisions and actions;Whether its systems have enabled ECGD to react quickly enough to material events affecting their risk situation—for example, whether the time frames under which country risk assessments and country cover decisions take place, are appropriate;Whether ECGD's exposure management is robust. For example, does it enable ECGD to avoid over-concentration of risk, and monitor and control effectively the changing risk profile of ECGD's exposures?Is accountability for risk and risk decisions within ECGD and HMG sufficiently clear and unambiguous?Whether the internal financial and operational control regimes, ethos and culture in ECGD adequately provide the emphasis and incentives to deliver the risk-reward balance which Ministers have specified in relation to ECGD; and how these control systems compare to good risk management practice in the private sector.Whether the internal operational control regimes, ethos and culture in the relevant parts of the Treasury adequately provide the emphasis and incentives to deliver the risk-reward balance which Ministers have specified in relation to ECGD.ECGD and Treasury are jointly inviting bids from suitably qualified consultants to conduct the Review.