Risk Governance

The goals of this framework are as follows:

• To minimize ambiguity by clearly defining responsibilities and reporting procedures for decision makers.
• To institute a proper system of checks and balances by ensuring that senior management is aware at all times of material risk exposure.
• To manage concentration of risk by avoiding the threat of insolvency from an over-concentration of risk in particular areas.
• To facilitate diversification by enabling management to identify diversification benefits from apparent risk-return trade-offs.
• To reassure external constituencies that AEGON has appropriate risk management structures and controls in place.

Governance structure

AEGON’s risk management framework is represented across all levels of the organization. This ensures a coherent and integrated approach to risk management throughout the company. Similarly, AEGON has a number of company-wide risk policies in place, which detail specific operating guidelines and limits. These policies are designed to keep overall risk-specific exposures to a manageable level. Any breach of policy limits or warning levels triggers immediate remedial action or heightened monitoring. Further risk policies may be developed at a local level to cover situations specific to particular regions or operating units.

AEGON’s risk management governance structure has three basic layers:

• The Supervisory Board (and the Supervisory Board Risk Committee).
• The Executive Board (and the Executive Board Risk Committee).
• Risk and Capital Committees (RCCs) present at group level, regional level and in AEGON’s operating units.

AEGON’s Executive Board has overall responsibility for risk management. The Board adopts the risk governance framework and determines the company’s overall risk tolerance and company-wide risk policies.

In 2010, AEGON established the Executive Board Risk Committee with responsibility for ensuring proper execution of the risk governance framework, as well as monitoring compliance with the risk tolerance and company-wide risk policies. The Executive Board Risk Committee has three members: the Chief Executive Officer, the Chief Financial Officer and the Chief Risk Officer. This Committee reports regularly significant risks to and discusses risk strategy with the Risk Committee of the Supervisory Board, which is responsible for overseeing AEGON’s enterprise risk management, including risk governance and measures taken to ensure risk management is integrated properly into the company’s broader strategy. The Risk Committee of the Supervisory Board also supervises overall risk exposure in light of management’s risk tolerance, the companywide risk policies and AEGON’s overall solvency position.

This Committee reports to the full Supervisory Board on a quarterly basis or more frequently, if required. Use this link for details of members of the Supervisory Board’s Risk Committee. It is the responsibility of the Executive Board to inform the Supervisory Board should any risks directly threaten the solvency, liquidity or operations of the company. The Chief Risk Officer also has an individual responsibility in this regard and has direct access to the Chairman of the Supervisory Board Risk Committee.

Risk and Capital Committees

The Executive Board Risk Committee (EBRC) also supervises the work of AEGON’s Group Risk & Capital Committee (GRCC). The GRCC is responsible for managing AEGON’s overall balance sheet position, while ensuring that risk-taking is within overall tolerance levels and risk policies, and that the company’s capital position is sufficient to support both the company’s business objectives and capital requirements. The Management Board oversees the activities of the GRCC. The GRCC is comprised of the company’s Chief Financial Officer (Chairman), the Head of the Corporate Financial Center, the Chief Investment Officer for AEGON’s general account, CFOs from the Americas, the Netherlands and the United Kingdom and the Chief Risk Officer. The Chief
Risk Officer has the additional authority to defer decisions that can have a significant impact on the company’s solvency, liquidity or operations to the Executive Board Risk Committee.

Risk and capital Committees (RCCs) have also been established at each of AEGON’s regions and operating units. The responsibilities and prerogatives of the RCCs are set out in their respective charters and are similar in content to those of the GRCC, but tailored to local circumstances. AEGON’s regional and operating unit Chief Risk Officers (CROs) have the additional authority to defer decisions that can have a significant impact on the region’s or operating unit’s solvency, liquidity or operations to the Board of the region or operating unit and AEGON’s Chief Risk Officer.

Group Risk

Group Risk is responsible for developing and keeping oversight of compliance with the risk governance framework, risk methodology, risk tolerances and risk policies. This involves identifying risk, particularly operational and emerging risk, as well as reviewing risk assessments carried out by operating units. Group Risk also identifies best risk management practices, facilitates implementation thereof and helps ensure there is consistency in the application of these practices across the company. In addition, Group Risk performs risk analyses, either at its own initiative or at the request of management, including the analysis of extreme events and related management capabilities. AEGON’s risk management staff structure is fully integrated. Operating unit CROs have a direct reporting line into AEGON’s Chief Risk Officer or one of the regional CROs that report directly into AEGON’s Chief Risk Officer. Regions include the Americas, Central & Eastern Europe and Asia.

Lines of defense

AEGON’s risk management structure includes the establishment of three “lines of defense” to ensure conscious risk-return decisions and limit the magnitude of potential losses within defined levels of certainty. The objective of this structure is to avoid surprises, either due to unidentified risks materializing or losses that exceed pre-defined risk tolerance levels and related limit structures. The company’s first line of defense has direct responsibility for managing and taking risk in accordance with defined risk tolerances and risk policies, i.e. business and support functions. The second line of defense facilitates and oversees the effectiveness and integrity of enterprise risk management across the company, i.e. risk functions and committees. Finally, the
third line of defense provides independent assurance and challenge regarding the effectiveness and integrity of enterprise risk management across the company, i.e. audit functions and committees.