Audit and Risk Committee report

Schroders’ approach demonstrates its culture of putting clients first, of wanting to do the right thing while ensuring the business grows sustainably.

Rhian Davies, Chairman of the Audit and Risk Committee (photo)

Rhian Davies
Chairman of the
Audit and Risk Committee

Committee membership (meeting attendance is in chapter The Board and its Committees)

Rhian Davies (Chairman)

Robin Buchanan

Philip Howard

Nichola Pease

Having been a member of the Committee since July 2015 and Chairman since April 2016, I have been impressed with the openness and willingness with which management engages with me, the Committee and the business’ key stakeholders, including its global regulators. At a time of unprecedented change and scrutiny of the asset management sector, Schroders’ approach demonstrates to the Committee its culture of putting clients first and of wanting to do the right thing while ensuring the business grows sustainably within a strong governance framework.

Through our work, the Committee embraces its role of protecting the interests of shareholders in connection with the integrity of published financial information and the effectiveness of the audit. During 2016, the Committee’s activity has been focused towards this area of its responsibility, notably the work involved in undertaking the external audit tender. As reported in the 2015 Annual Report and Accounts, in order to meet new European audit reforms we are required to replace PwC as our external auditor no later than 2020. The external audit tender was put out to tender in 2016. In November 2016, we announced that EY would replace PwC as the Group’s auditor for the financial year commencing 1 January 2018. In addition, a number of audit related services will be transferred to EY during 2018. Further information can be found in chapter External audit.

The Committee has also reviewed the Group’s control environment and system of internal controls and the Group’s management of risk and compliance related activities, including oversight of the Group’s material outsource providers. As a part of this work, the Committee considered the Group’s ICAAP, ILAAP, its risk appetite and various operational stress scenarios in order that the Board can make the viability statement as set out in chapter Key risks and mitigations.

We have also continued to oversee the development of our conduct programme designed to identify emerging trends and heightened risk issues.

There will be a number of significant strategic, commercial and operational impacts on asset and wealth managers arising from both MiFID II and Brexit. Preparation for the implementation of MiFID II, which has been delayed until January 2018, is ongoing. The result of the referendum on 23 June 2016, which means that the UK is expected to exit the European Union, and the US presidential election are likely to continue to cause heightened economic, political and regulatory uncertainty over the medium term. Schroders is well placed to manage the risks arising from these events and the Committee is reassured by the readiness work being undertaken, including the impact of potential legal and regulatory changes on Schroders’ business model. This will continue to be an area that the Board as a whole will keep under review.

We seek to ensure that appropriate systems and controls continue to be in place across the Group to identify and mitigate threats or to take advantage of opportunities that might arise. This focus will remain an important part of the Committee’s work during 2017 and beyond.

Rhian Davies
Chairman of the Audit and Risk Committee