Risk and Capital Management

We began the year with an established risk and governance framework set out in the Group Operating Model, economic capital tools developed through at least two full iterations, and transparent processes for managing, monitoring and controlling risks. During 2012 we merged these new tools and processes into business-as-usual operations and embedded them more deeply into the underlying businesses. We will continue to refine structures and processes, but the overall governance structures are stable and provide opportunities to obtain more detailed management information as required. Risk frameworks, governance and the Group's internal capital model are overseen centrally but implemented by our businesses locally so that local requirements can be addressed appropriately. This is reinforced through senior Group executive representation on business unit regulatory boards coupled with formal dual reporting for all key control functions.

In 2012 we revisited the risk strategy set in 2010, and now separately consider each of the regions in which we operate. This has confirmed that each region is sufficiently capitalised in its own right and that the distribution and allocation of capital to the relevant businesses in each region largely reflects the different risk profiles within those regions. This has also supported the decision and successful execution of our debt repayment programme. Even when applying significant economic stresses to our current capital, the Group remains sufficiently capitalised. We have also identified management actions that could be taken to remedy the Group's capital or liquidity position in a severe shock event where capital or liquidity levels significantly breach our risk appetite limits for a sustained period. In future we will be seeking to make use of diversification within these different regions in line with the Group's overall strategy.

The Group's overall risk profile, reflected by our economic capital results, is stable and indicates that the Group is comfortably within appetite on all capital measures, despite the weakened global recovery.