Strategy

If Quilter's strategy does not yield the anticipated benefits, for example, through inaccurate prediction of the type of products and the level of advice required by its target customer base or inability to price such products and services competitively, this may have a material adverse effect on the Group's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Strategic and business planning process

•     Monitoring of key performance indicators

•     Robust strategic initiative programme management

•     Risk oversight and assurance activity

•     Clear accountabilities

Reputation and brand

Quilter is dependent on the strength of its reputation and its brands, which are vulnerable to adverse market perception or negative publicity, and the Company may face challenges with regard to its ongoing rebranding initiative.

Key management actions

•     Employee engagement on responsible business, responsible investment and business code of conduct compliance

•     Understanding potential impacts on reputation through our risk framework and policies

•     Brand use policy and standards

•     Crisis management plans and procedures

Competitive pressure

Quilter's business is conducted in a competitive environment and, if Quilter is not successful in anticipating and responding to competitive change, adviser or customer preferences or demographic trends in a timely and cost effective manner, its business, financial condition, results of operations and prospects could be materially adversely affected.

Key management actions

•     Differentiated service and product offerings

•     Competitor activity monitoring

•     Disruptive technologies and non-traditional competition monitoring

People and culture

Quilter may fail to attract and retain talented advisers, investment managers, portfolio managers, senior management and other key employees. This would present a risk to the delivery of Quilter's overall strategy, in particular during this period of significant change across the Group. Additionally this could have a material adverse effect on Quilter's business, financial and operational performance, prospects, and reputation.

Key management actions

•     Risk adjusted remuneration

•     Performance appraisals and monitoring

•     Culture and employee engagement surveys

•     Employee wellbeing initiatives

•     Compliance with the code of conduct and human resources policies and standards

Market risks

Quilter's results may be materially adversely affected by conditions in global capital markets, the global economy generally and the UK economy in particular that result in a decrease in the value of customer investment portfolios. The volatility and strength of debt and equity markets, the direction and pace of change of interest rates and inflation all affect the economic environment, investor confidence, our reputation and, ultimately, the volume and profitability of Quilter's business.

Key management actions

•     Financial risk limits

•     Stress and scenario analysis and stress testing

•     Economic environment monitoring

•     Financial risk policies and standards

•     Maintain strong balance sheet

Conduct risk

Conduct risk is the risk that decisions and behaviours made by Quilter, its employees, its advisers and appointed representatives lead to customers being treated unfairly or otherwise result in detrimental customer outcomes and damage to our reputation. Conduct risk may arise where Quilter fails to design, implement or adhere to appropriate policies and procedures, offer products, services or other propositions that do not meet the needs of customers or fails to perform in accordance with its intended design, fails to communicate appropriately with customers, fails to deal with complaints effectively, sells or recommends unsuitable products or solutions to customers, fails to provide them with adequate information to make informed decisions or provide unsuitable investment for financial planning advice to customers, or fails to do any of the foregoing on an ongoing basis after initial sales, amongst other things. This risk may also arise as a result of employee (mis)conduct.

Key management actions

•     Business code of conduct and mandatory training

•     Defined and measured customer outcomes

•     Customer outcomes governance

•     Quilter policy suite compliance including responsible business conduct, financial crime and customer policies

Conflicts of interest

Quilter faces significant potential and actual conflicts of interest, including those which result from Quilter's advised distribution channel. If the Group fails to manage conflicts of interest between its advice channel and other businesses across the Group, it could result in reputational damage, regulatory liability or customer restitution, which could have a material adverse impact on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Conflicts of interest register and monitoring

•     Conflicts identification and management training

•     Conflicts of interest policy compliance

Investment performance

An important factor in Quilter's ability to maintain and grow its customer base and its network of advisers is the investment performance of the customer assets that Quilter manages. Actual or perceived underperformance of customer assets that are managed by Quilter could have a material adverse effect on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Investment strategy

•     Investment risk policy and standards compliance

•     Investment performance monitoring

Insurance risks

Quilter has exposure to mortality risk (risk of higher than expected rate of death claims on life protection business) and morbidity risk (risk of higher than expected rate of claims on critical illness protection business) from its life assurance business, which issues policies that carry certain guaranteed benefits upon the death, or defined illness, of the policyholder. These risks could be aggravated by any potential failure in underwriting processes and controls designed to identify sub-standard lives at the new business stage.

Key management actions

•     Underwriting standards and processes

•     Claims investigations and pricing reviews

•     Reinsurance

•     Budgeting and expense management

Adviser and customer proposition

Failure by Quilter to offer products, services and platforms that meet adviser and customer needs and which are considered suitable, or failure to fairly and honestly communicate with advisers and customers, could result in advisers ceasing to recommend Quilter's products or services, or recommending fewer of Quilter's products or services, and declining persistency of Quilter's products. The asset classes or investment strategies underlying the portfolios managed by Quilter may become less attractive to customers or their advisers, which could reduce demand for Quilter's products and have a material adverse impact on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Ongoing adviser training

•     Customer communication programme

•     Suitability reviews

•     Product and customer-related policies and standards

•     Product and proposition governance

Information technology

Quilter uses computer systems to conduct its business, which involves managing and administering assets on behalf of customers in its wealth portfolios and on its platforms. Quilter's business is highly dependent on its ability to access these systems to perform necessary business functions and to provide adviser and customer support, administer products, make changes to existing policies, file and pay claims, manage customer's investment portfolios and produce financial statements and regulatory returns. Failure to manage this risk could have a material adverse impact on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     IT estate enhancement programmes

•     Active systems monitoring

•     Resilience plans

•     IT policies and standards compliance

Data information and cyber threats

Quilter's business, by its nature, requires it to store, retrieve, evaluate and utilise customer and Company data and information, which is highly sensitive. Quilter is subject to the risk of IT security breaches from parties with criminal or malicious intent (including cyber crime). Should Quilter's intrusion detection and anti-penetration software not anticipate, prevent or mitigate a network failure or disruption, or should an incident occur to a system for which there is no duplication, it may have a material adverse effect on Quilter's customers, business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Cyber threat defences and monitoring Resilience and continuity plans

•     Data governance arrangements

•     Information security and data protection policy and standards compliance

Third party risk

Quilter outsources and procures certain functions and services to third parties and may increase its use of outsourcing in the future. If Quilter does not effectively develop and implement its outsourcing strategies and its internal capability to manage such strategies, third party providers do not perform as anticipated, or Quilter experiences technological or other problems with a transition, it may not realise productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and loss of business, and damage to its reputation.

Key management actions

•     Third party criticality assessments, due diligence and monitoring

•     Resilience plans and exit planning

•     Third party risk management policy and standards including supplier management practices compliance

Legal and regulatory risk

Quilter's regulated businesses are subject to extensive regulation both in the UK (by the Prudential Regulatory Authority ("PRA") and the Financial Conduct Authority ("FCA") and internationally, and Quilter faces risks associated with compliance with these regulations. Quilter's businesses are subject to the risk of adverse changes in laws, regulations and regulatory requirements in the markets in which they operate. Regulatory reform initiatives could also lead to increased compliance costs or other adverse consequences for firms within the financial services industry, including Quilter. Failure to manage these risks could have a material adverse impact on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Compliance advice and assurance programme

•     Legislative and regulatory horizon scanning

•     Training and staff awareness programme

•     Compliance policy and standards compliance

Financial crime

Quilter is required to comply with all applicable financial crime laws and regulations (including anti-money laundering, anti-terrorism, sanctions, anti-fraud, anti-bribery and corruption and insider dealing) in the jurisdictions in which it operates. Where Quilter is unable to comply with applicable laws, regulations and expectations, regulators and relevant law enforcement agencies have the ability and authority to impose significant fines and other penalties, including requiring a complete review of business systems, day-to-day supervision by external consultants and ultimately the revocation of regulatory authorisations and licences. Failure to manage these risks could have a material adverse impact on Quilter's business, financial condition, results of operations and prospects, and reputation.

Key management actions

•     Mandatory staff training

•     Numerous controls including due diligence, politically exposed persons assessment, and sanctions screening

•     Financial crime policies and standards