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Corporate Governance Statement

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Board of Directors

The Board of Directors is responsible for the corporate governance of the Society.  The Board guides and monitors the business and affairs of the Society on behalf of the members by whom they are elected and to whom they are accountable. An important feature of the Board is to ensure compliance with the prudential and solvency requirements of the Australian Prudential Regulatory Authority (APRA) and the Australian Securities & Investments Commission (ASIC).

The key responsibilities of the Board include:

  • Approving the strategic direction and related objectives and monitoring management performance in the achievement of these objectives;
  • Adopting an annual budget and business plan and monitoring the financial performance of the Society;
  • Overseeing the establishment and maintenance of internal controls and effective monitoring systems;
  • Ensuring all major business risks are identified and effectively managed;
  • Ensuring the Society meets its legal and statutory obligations.

Structure of the Board

Directors of the Society are considered to be independent and free from any business or other relationship that could interfere with, or could be perceived to materially interfere with the exercise of their unfettered and independent judgement.

 

The Board has established the following committees which operate under a charter approved by the Board.

Board Committees

Governance Committee

The purpose of the Governance Committee is to assist the board in the exercise of effective corporate governance, including oversight of the Society’s Governance and Fit & Proper Policies.

The purpose of the Governance Policy is to ensure strong Corporate Governance in the prudent management and financial soundness of the Society and in maintaining public confidence in the financial system.

The purpose of the Fit & Proper – Responsible Person Policy is to manage the risk to its business or financial standing that persons acting in Responsible Person positions are fit and proper.

The committee has also been appointed by the board to fulfil the role of the Nominations and Remuneration Committees incorporating board renewal, remuneration and nominations.

Audit Committee

The Audit Committee will assist the Board in fulfilling its oversight responsibilities and act as an interface between the board and the internal and external auditors.  The Audit Committee will review:

  • The system of internal control;
  • The financial and regulatory/compliance reporting process; and
  • The audit process.

Risk Committee

The Committee will assist the board in fulfilling its oversight responsibilities and will be responsible for:

  • oversight of the risk profile and risk management of the Credit Union within the context of the Board determined risk appetite (although ultimate responsibility for risk oversight and risk management rests with the Board, and the Committee will refer all matters of significant importance to the Board);
  • making recommendations to the Board concerning the risk appetite and particular risks or risk management practices;
  • reviewing management’s plans for mitigation of the material risks faced by the Credit Union;
  • oversight of the implementation and review of risk management and internal compliance and control systems;
  • promotion of awareness of a risk based culture and the achievement of a balance between risk and reward for risks accepted.

Management Committees

Assets & Liabilities Committee (ALCO)

The ALCO is a committee responsible for managing the financial assets and liabilities of the Society. The committee recommends policy, sets strategy and monitors risks related to the management of the Society’s assets and liabilities regarding:

  • Pricing of the financial assets and liabilities including interest rates and fees;
  • Interest margin;
  • Interest rate risk;
  • Funding and liquidity management;
  • Investment management;
  • Profitability and capital management.

Management Risk Committee

The Management Risk Committee is responsible for periodically reviewing the group’s risk profile, fostering a risk-aware culture and reporting to the Board Risk Committee on the effectiveness of the risk management framework and of the company’s management of its material business risks.

The primary function of the Committee is:

  • the implementation and review of risk management and internal compliance and control systems;
  • reporting to the Board Risk Committee (BRC) on management’s plans for mitigation of the material risks faced by the Credit Union;
  • making recommendations to the BRC concerning the risk appetite and particular risks or risk management practices; and
  • promotion of awareness of a risk based culture amongst staff and the achievement of a balance between risk and reward for risks accepted.

Risk Management Objectives and Policies

The Board of Directors has implemented a Risk Management Policy which establishes the overall Risk Management Framework for managing operational risk. Specifically, the Risk Management Policy aims to:

  • Contribute to profitable prudential performance by achieving an appropriate balance between realising opportunities while minimising losses.
  • Maintain a comprehensive and up-to-date Risk Appetite Statement that addresses all material risks and sets the risk limits acceptable to the Board.
  • Be concerned with risk as exposure to the consequences of uncertainty, or potential deviations from that which is planned or expected.
  • Address Capital Management.
  • Facilitate regular reporting to Senior Management, the Board and relevant committees.

Risk Management Framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established separate Audit and Risk Committees which are responsible for developing and monitoring risk management processes. The committee reports regularly to the Board of Directors on its activities. 

Risk management policies and procedures are established to identify and analyse the risks faced by the Society, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management processes and systems are reviewed regularly to reflect changes in market conditions and the Society’s activities.

The Audit and Risk Committees oversee how management monitors compliance with the Society’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Society. The Audit and Risk Committees are assisted in its oversight role by Internal Audit. Internal Audit undertakes regular reviews of risk management controls and procedures, the results of which are reported to the Audit & Risk Committees.

The Society has undertaken the following strategies to minimise risks.

Market Risk

The Society is not exposed to currency risk, and does not trade in the financial instruments it holds on its books.

Credit Risk – Loans

The risk of losses from the loans undertaken is primarily reduced by the nature and quality of the security taken. The Board policy is to maintain at least 85% of loans in well secured residential mortgages which carry an 80% Loan to Valuation ratio or less.

The Society has a concentration in the retail lending for members who comprise employees and family in the Ford Motor Company. This concentration is considered acceptable on the basis that the Society was formed to service these members, and the employment concentration is not exclusive.

Should members leave the industry the loans continue and other employment opportunities are available to the members to facilitate the repayment of the loans.

Credit Risk – Liquid Investments

The risk of losses from the liquid investments undertaken is reduced by the nature and quality of the independent rating of the investee and the limits to concentration in one entity.

The Board policy is that investments shall be widespread to avoid any undue concentration of risk and all investments must be with financial institutions with a rating in excess of BBB- or higher. 

Credit Risk – Equity Investments

All investments in equity instruments are solely for the benefit of service to the Society. The Society invests in entities set up for the provision of services such as IT solutions, treasury services etc where specialisation demands quality staff which is best secured by one entity.

Liquidity Risk

The Society has set out the maturity profile of the financial assets and financial liabilities, based on the contractual repayment terms.

The Society is required to maintain at least 9% of total adjusted liabilities as liquid assets capable of being converted to cash within 48 hours under the APRA Prudential standards. The Society policy is to apply 15% of funds as liquid assets to maintain adequate funds for meeting member withdrawal requests. The ratio is checked daily. Should the liquidity ratio fall below this level the management and the Board are to address the matter and ensure that the liquid funds are obtained from new deposits and borrowing facilities available.

Operational Risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Society’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risk such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.

The Society’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Society’s reputation with overall cost effectiveness.