OP Financial Group’s operations are based on cooperative ideals, a strong capital base and capable risk management. OP Financial Group's mission and core values as well as strategic and financial targets form the basis for risk management.
The strategy outlines the Group’s risk appetite and risk management priorities. Risk management, on the other hand, helps to achieve the targets set in the strategy by controlling that risks are proportional to risk-bearing capacity. In the long term within moderate risk-taking, the Group seeks above-market-average growth. This requires controlled risk-taking relying on strong risk management.
Risk management is part and parcel of daily business and its management. Risk awareness and a moderate risk-taking approach are reflected in every business decision and form an integral part of corporate culture. OP manages customer relationships on a long-term basis and responsibly from the perspective of risk management. An example of the role of risk management in banking is that a borrower’s repayment capacity is a key prerequisite for loan approval. Robust risk management is in the interests of both customers and OP Financial Group.
Risks associated with OP Financial Group’s business segments differ in terms of weight. Credit risks, structural interest rate and funding risks and funding liquidity risks play a major role in Banking. Meanwhile, interest rate and other market risks are highlighted in Non-life Insurance and compliance risks and life insurance market risks in Wealth Management. Operational risks apply to all business segments alongside the trend towards automated and digitised services. The extent of OP Financial Group provides significant risk diversification benefits. Meanwhile, however, the role of various concentration risks will increase.
According to its new strategy, OP will invest in creating new types of service packages and business models in the years to come. Before the company launches any products or services or adopts new operating models or systems, it assesses their risks using procedures as laid down by the central cooperative’s Risk Management. OP Financial Group only offers products to customers and applies business models that have been approved at Group level.
The most significant business risks affecting OP Financial Group and their most common management tools are detailed in the table below.
OP Financial Group’s risk management is based on three lines of defence. The first line of defence consists of risk management applied within business and other operations. It controls risk decisions and monitors risk exposure. Customer knowledge acquired through active customer relationship management ensures that risk-taking is moderate and guarantees the prerequisites for successful risk management.
The second line of defence consists of risk management independent of operational business organisations. In charge of general risks management conditions within OP Financial Group, it controls, supports and supervises the implementation of the risk management principles, confirmed by the Supervisory Board, at OP Financial Group and its entities.
The third line of defence involves centralised Internal Audit, which audits and assesses risk management performed by both the central cooperative and member entities.