85 Risk management General Aegon’s risk governance framework Governance structure Objectives of risk management The MB oversees a broad range of strategic and operational  issues. While the EB remains Aegon’s statutory executive body,  the MB provides vital support and expertise in safeguarding  Aegon’s strategic goals. The MB discusses and sponsors  Aegon’s EB has overall responsibility for risk management. The  EB adopts the risk strategy, risk governance, risk tolerance and  material changes in risk methodology and risk policies. The Group  Chief Risk Officer (CRO) attends EB meetings and has a direct  reporting line to the SB to discuss enterprise risk management  and related matters, and is a member of the MB. Additionally, there are working groups and regional committees  which support the ERMC and GRCC. 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 comprehensive suite of  company-wide risk policies, 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  business units. Aegon’s risk management governance structure  has three basic layers: Aegon has a strong culture of risk management, based on  a clear, well-defined risk governance. The goals of this risk  governance are: As an insurance group, Aegon manages risk on behalf of its  customers and other stakeholders. As a result, the company is  exposed to a range of underwriting, operational and financial  risks. Aegon’s risk management and control systems are  designed to ensure that these risks are managed effectively and  efficiently in a way that is aligned with the company’s strategy. For Aegon, risk management involves: By setting certain predefined tolerances and adhering to policies  that limit the overall risk to which the company is exposed,  Aegon is able to accept risk with the knowledge of potential  returns and losses Aegon’s risk strategy provides direction for the targeted Aegon  risk profile while supporting the Aegon business strategy. The  targeted risk profile is determined by customer need, Aegon’s  competence to manage the risk, the preference of Aegon for  the risk and whether there is sufficient capacity to take the risk.  Key inputs for our risk preferences include expected returns,  alignment with customer interests, the existing risk exposures  and other risk characteristics. Next to the targeted risk profile, risk tolerances and limits are  established to ensure that Aegon maintains, at all times,  a solvency and liquidity position such that no plausible scenario  would cause the company to default on its obligations to  policyholders. To accomplish this, Aegon has established  a number of risk criteria and tolerances as part of its risk strategy: ■ The Supervisory Board (SB) and the Supervisory Board Risk  Committee (SBRC); ■ The Executive Board (EB) and the Management Board (MB); ■ The Enterprise Risk Management Committee (ERMC) and the  Group Risk & Capital Committee (GRCC).  ■ Financial strength: Ensure Aegon meets long-term obligations  to policyholders and to enable Aegon to compete in key  markets as a financially strong global insurer; ■ Continuity: Ensure that Aegon meets policyholder obligations,  even under extreme event scenarios; ■ Culture: Encourage a strong risk awareness by stressing the  company’s low tolerance for operational risk. This helps to  improve operational excellence and ensures that the company  is fair in its treatment of customers and other stakeholders; ■ Risk balance: Manage the concentration of risk and encourage  risk diversification within Aegon.  ■ To minimize ambiguity by clearly defining roles and  responsibilities and risk reporting procedures for decision  makers; ■ To institute a proper system of checks and balances, and to  ensure that senior management is aware at all times of  material risk exposure; ■ To manage risk in line with the targeted risk profile, including  the avoidance of 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 stakeholders that Aegon has appropriate  risk management structures and controls in place.  ■ Understanding which risks the company is able to underwrite; ■ Establishing a company-wide framework through which the  risk-return trade-off associated with these risks can be  assessed; ■ Establishing risk tolerances and supporting policies to limit  exposure to a particular risk or combination of risks; ■ Measuring and monitoring risk exposures and actively  maintaining oversight of the company’s overall risk and  solvency positions.  Definition and tolerances