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Western Australian Treasury Corporation 2012 Annual Report - Page 26Western Australian Treasury Corporation 2012 Annual Report - Page 27
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CONTINUED OUR PEOPLE OVERVIEW OF SAFETY, HEALTH AND ILLNESS/INJURY MANAGEMENT WATC IS COMMITTED TO AN OCCUPATIONAL SAFETY AND HEALTH (OSH) MANAGEMENT SYSTEM THAT IS COMPREHENSIVE AND CONSULTATIVE AND ALLOWS FOR CONTINUOUS IMPROVEMENT IN WORKING TOWARDS A SAFE AND HEALTHY WORKPLACE. THE CHIEF EXECUTIVE OFFICER LEADS THE WAY AS AN ACTIVE MEMBER OF THE OSH COMMITTEE AND IS SUPPORTED BY OTHER MEMBERS OF THE EXECUTIVE MANAGEMENT COMMITTEE. THE FORMAL MECHANISM FOR CONSULTATION IS THE OSH COMMITTEE, WHICH IS COMPRISED OF MANAGEMENT REPRESENTATIVES, SAFETY AND HEALTH REPRESENTATIVES AND EMPLOYEE REPRESENTATIVES. THE OSH COMMITTEE MEETS ON A QUARTERLY BASIS AND FOUR MEETINGS WERE HELD DURING THE REPORTING PERIOD. OSH INFORMATION, INCLUDING ACCESS TO OSH COMMITTEE MINUTES, IS MADE AVAILABLE TO ALL EMPLOYEES THROUGH WATC'S INTRANET AND NOTICEBOARDS WITHIN THE OFFICE. THE OSH SYSTEM IS SUPPORTED BY DELIVERY OF TRAINING TO EMPLOYEES. ALL NEW EMPLOYEES RECEIVE OSH TRAINING AS PART OF THEIR INDUCTION PROGRAM. THIS IS REINFORCED THROUGH ANNUAL INFORMATION SESSIONS FOR EMPLOYEES. THERE WAS A PARTICULAR FOCUS ON WORKPLACE ERGONOMICS FOR THE SESSIONS HELD DURING THE REPORTING PERIOD. ALL EMPLOYEES HAVE ATTENDED AT LEAST ONE SAFETY AND HEALTH TRAINING SESSION IN THE PAST TWO YEARS. THE OSH SYSTEM WAS EVALUATED THROUGH AN EXTERNAL AUDIT, BASED ON THE WORKSAFE PLAN, BY AN APPROVED WORKSAFE AUDITOR IN LATE 2011. THE AUDIT FOUND THAT WATC HAD AN EXCELLENT OSH SYSTEM IN PLACE THAT WAS WORKING WELL. THIS WAS SUBSEQUENTLY RECOGNISED THROUGH THE AWARD OF A PLATINUM CERTIFICATE OF ACHIEVEMENT FROM WORKSAFE. WATC HAS AN ILLNESS AND INJURY MANAGEMENT SYSTEM, INCLUDING RELEVANT POLICIES, PROCEDURES AND GUIDELINES. THIS INCLUDES AN ILLNESS AND INJURY MANAGEMENT POLICY (WHICH COVERS RETURN TO WORK PLANS) THAT HAS BEEN ENDORSED BY RISKCOVER AS BEING COMPLIANT WITH THE WORKERS COMPENSATION AND INJURY MANAGEMENT ACT 1981 (WA). IT ALSO INCLUDES HAVING ONE EMPLOYEE ACCREDITED IN MANAGING ILLNESSES AND INJURIES IN THE WORKPLACE. WATC ALSO HAS A WELLNESS PROGRAM TO PROMOTE, ENCOURAGE AND SUPPORT EMPLOYEE SAFETY AND HEALTH. THIS INCLUDES PROVIDING EMPLOYEES WITH ACCESS TO HEALTH CHECKS, SKIN CANCER CHECKS AND FLU INJECTIONS, INFORMATION SESSIONS ON HEALTH ISSUES AND PARTICIPATION IN TEAM SPORT EXERCISES. WATC HAD NO FATALITIES OR INJURIES IN THE WORKPLACE LEADING TO LOST-TIME INJURY DURING THE REPORTING PERIOD, AS OUTLINED BELOW. MEASURE ACTUAL RESULTS RESULTS AGAINST TARGET 2009/10 2011/12 TARGET COMMENT NUMBER OF FATALITIES 0 0 0 LOST TIME INJURY/DISEASE (LTI/D) INCIDENCE RATE 0 0 0 LOST TIME INJURY SEVERITY RATE 0 0 0 PERCENTAGE OF INJURED WORKERS RETURNED TO WORK WITHIN 13 WEEKS. N/A N/A 100% NO LOST TIME INJURIES DURING REPORTING PERIOD. PERCENTAGE OF INJURED WORKERS RETURNED TO WORK WITHIN 26 WEEKS. N/A N/A ≥ 80% NO LOST TIME INJURIES DURING REPORTING PERIOD. PERCENTAGE OF MANAGERS AND SUPERVISORS TRAINED IN OCCUPATIONAL SAFETY, HEALTH AND INJURY MANAGEMENT RESPONSIBILITIES. 100% 100% ≥ 80% 24 WESTERN AUSTRALIAN TREASURY CORPORATION
RISK MANAGEMENT WATC IS EXPOSED TO A RANGE OF FINANCIAL AND NON- FINANCIAL RISKS IN CONDUCTING ITS DAY-TO-DAY OPERATIONS. TO MITIGATE THESE RISKS, THE RISK MANAGEMENT BRANCH USES A BOARD-APPROVED RISK MANAGEMENT FRAMEWORK TO ENSURE THAT ANY ADVERSE EVENTS DO NOT EXCEED WATC'S RISK APPETITE AND TO ENSURE THAT WATC MEETS ITS OBLIGATIONS TO CLIENTS AND OTHER STAKEHOLDERS. THIS FRAMEWORK UTILISES SYSTEMS, POLICIES AND PROCESSES TO ENSURE THAT ITS RISKS ARE APPROPRIATELY MANAGED AND COMMUNICATED IN A TIMELY MANNER. WATC ALSO MAINTAINS CAPITAL PROVISIONS GUIDED BY APRA STANDARDS AND THE BASEL ACCORD TO COVER THE FINANCIAL IMPACT OF ANY ADVERSE EVENTS. THE KEY RISKS FACED BY WATC, INCLUDING ANY CHANGES IN RISK PROFILE OR THE APPROACH TO THE MANAGEMENT OF THESE RISKS, ARE OUTLINED IN THE FOLLOWING SECTIONS. CREDIT RISK CREDIT RISK IS THE RISK THAT WATC'S COUNTERPARTIES ARE UNABLE TO MEET THEIR FINANCIAL OBLIGATIONS WHEN DUE. WATC'S LARGEST CREDIT EXPOSURES FLOW FROM THE NEED TO MAINTAIN AN INVESTMENT PORTFOLIO WITH FINANCIAL INSTITUTIONS IN ORDER TO MANAGE LIQUIDITY RISK AND TO SUPPORT THE MARKET IN ITS DEBT PAPER. IN THE 12 MONTHS TO 30 JUNE 2012, NO COUNTERPARTY FAILED TO MEET ITS OBLIGATIONS TO WATC. HOWEVER, THE CREDIT ENVIRONMENT WORSENED IN 2011/12, AS THE EUROZONE CRISIS AND THE DETERIORATING GLOBAL ECONOMIC OUTLOOK AFFECTED BANKS' PROFITABILITY AND FUNDING MARKETS. RATING AGENCIES ANNOUNCED MULTIPLE DOWNGRADES ON MANY OF WATC'S BANK COUNTERPARTIES (AND THEIR FUTURE OUTLOOKS REMAINED BIASED TOWARD FURTHER DOWNGRADES). THESE RATING DOWNGRADES HAVE INCREASED WATC'S CREDIT RISK CAPITAL REQUIREMENTS DURING THE YEAR. HOWEVER, THE MAIN CREDIT RISK CAPITAL DRIVER WAS THE TEMPORARY INCREASE IN THE SIZE OF WATC'S INVESTMENT PORTFOLIO IN THE LATTER HALF OF THE YEAR IN ORDER TO FUND THE MATURING JULY 2012 BENCHMARK BOND. CREDIT RISK EXPOSURE ALSO ARISES FROM THE DERIVATIVE POSITIONS USED TO MANAGE THE MARKET RISK AND LIQUIDITY RISK ASSOCIATED WITH WATC'S FUNDING ACTIVITIES. IN 2011/12, WATC CONTINUED TO REDUCE ITS CREDIT EXPOSURE TO DERIVATIVE COUNTERPARTIES BY EXECUTING CREDIT SUPPORT ANNEXES (CSAS) WITH THREE ADDITIONAL COUNTERPARTIES, BRINGING THE TOTAL NUMBER OF EXECUTED CSAS TO EIGHT. THESE RECIPROCAL AGREEMENTS REQUIRE COUNTERPARTIES TO POST COLLATERAL WITH WATC SHOULD DERIVATIVE POSITIONS MOVE SHARPLY IN WATC'S FAVOUR. MARKET RISK MARKET RISK IS THE RISK OF FINANCIAL LOSS (REALISED OR UNREALISED) AS A RESULT OF CHANGES IN MARKET FACTORS SUCH AS INTEREST AND FOREIGN EXCHANGE RATES. WATC AIMS TO MANAGE, WITHIN AGREED PARAMETERS, ALL MARKET RISKS THAT THREATEN TO HAVE AN ADVERSE AND UNACCEPTABLE IMPACT ON ITS FINANCIAL POSITION. MARKET RISK IS MONITORED AND REPORTED DAILY USING VALUE AT RISK (VAR) TECHNIQUES AND IS COMPLEMENTED WITH REGULAR STRESS TESTING TO ENSURE THAT THE POTENTIAL IMPACT OF EXTREME MARKET EVENTS ON WATC'S PORTFOLIO EXPOSURES IS COMMUNICATED AND FULLY UNDERSTOOD. MARKET RISK CAPITAL PROVISIONS (WHICH ARE A MULTIPLE OF VAR) WERE HIGHER IN 2011/12 DUE TO INCREASED INTEREST RATE VOLATILITY ASSOCIATED WITH THE EUROZONE CRISIS AS WELL AS A NEED TO HOLD LARGER AMOUNTS OF FUTURES FOR SHORT PERIODS OVER THE YEAR FOR TEMPORARY HEDGING PURPOSES. LIQUIDITY RISK WATC DEFINES LIQUIDITY RISK AS THE RISK OF HAVING INSUFFICIENT FUNDS AVAILABLE TO MEET ITS FINANCIAL OBLIGATIONS, AS AND WHEN THEY FALL DUE, WITHOUT HAVING TO INCUR EXCESSIVE LOSSES OR FUNDING COSTS. WATC'S LIQUIDITY RISK IS MANAGED THROUGH A COMBINATION OF MAINTAINING A DIVERSE RANGE OF FUNDING SOURCES AND A LEVEL OF LIQUID ASSETS THAT IS ADJUSTED IN ACCORDANCE WITH BALANCE SHEET SIZE AND CASH FLOW PROJECTIONS. MARKET LIQUIDITY WAS SOMEWHAT VARIABLE IN 2011/12 DUE, IN PART, TO THE IMPACT OF THE EUROZONE CRISIS. WATC WAS, HOWEVER, ABLE TO CONTINUE TO TAP SHORT- AND LONG-TERM FUNDING AT COMPETITIVE PRICES WITH ADEQUATE DEMAND FOR SHORT-TERM INSCRIBED STOCK AND OFFSHORE EURO COMMERCIAL PAPER, AS WELL AS LONG-TERM BONDS. OPERATIONAL RISK OPERATIONAL RISKS ARE INHERENT IN ALL ASPECTS OF WATC OPERATIONS. IN ORDER TO MANAGE THESE RISKS EFFECTIVELY, WATC HAS A RISK MANAGEMENT FRAMEWORK IN PLACE THAT IDENTIFIES AND ASSESSES THESE OPERATIONAL RISKS AND ENSURES THAT EXISTING CONTROLS KEEP RISKS WITHIN THE BOARD'S TOLERANCE LEVELS. THERE IS A RANGE OF CONTROLS, SUCH AS SEGREGATION OF DUTIES, REPORTING OF KEY RISK INDICATORS, DOCUMENTATION OF PROCEDURES AND INTERNAL AUDIT CHECKS THAT ASSIST IN MITIGATING THESE RISKS. WATC ALSO HAS A HIGHLY DEVELOPED AND TESTED BUSINESS CONTINUITY PLAN. THERE WERE NO SIGNIFICANT OPERATIONAL RISK EVENTS DURING 2011/12. OPERATIONAL RISK CAPITAL INCREASED PROPORTIONALLY TO THE GROWTH IN TOTAL DEBT DURING 2011/12. THE FOLLOWING TABLE COMPARES WATC'S AVERAGE AND PEAK CAPITAL PROVISIONS DURING 2011/12 WITH THOSE FOR THE PREVIOUS FINANCIAL YEAR. AVERAGE PEAK SOURCE OF RISK 2011/12 ($M) 2010/11 ($M) 2011/12 ($M) 2010/11 ($M) CREDIT RISK 32.2 26.4 40.3 32.8 MARKET RISK 9.8 8.9 14.7 15.6 OPERATIONAL RISK 9.2 9.9 10.2 10.0 OVERALL 51.3 45.2 61.9 51.3 ANNUAL REPORT 2012 25
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