macquarie.com.au  2014 Annual Financial Report  Macquarie Group Limited and its subsidiaries  Risk Management Report  continued  New business and acquisitions The change in staffing levels within RMG is generally in line  with the changes in staffing overall at Macquarie. RMG staff  numbers as at 31 March 2014 were 553, which is a ten per  cent increase over the year.  Innovation is encouraged across Macquarie’s businesses  and activities. Therefore, it is important that all elements of  new business initiatives are well understood before  commencement. All new business initiatives must be signed off by RMG  prior to commencement. The formal new business approval process requires all relevant  risks (for example, market, credit, equity, legal, compliance,  taxation, accounting, operational and systems) to be reviewed  to ensure that all risks are identified and addressed prior to  implementation (including ongoing risk monitoring processes).  The approvals of RMG, Finance Division, Taxation Division,  Legal and Governance and other relevant stakeholders within  Macquarie are obtained. RMG also checks that all necessary  internal approvals are obtained prior to commencement. For all material transactions, independent input from RMG  on the risk and return of the transaction is included in the  approval document submitted to senior management. The Operational Risk function within RMG oversees the  new product and business approval process.  RMG Internal Audit performs an audit of the operations of  any significant new businesses based on an assessment of  the associated risk faced by Macquarie. The audit typically  takes place within six to twelve months following acquisition  or launch and includes confirmation that operations are in  line with the new product approval document.  The risk management framework incorporates active  management and monitoring of market, credit, equity,  liquidity, operational, compliance, regulatory and legal  risks. It is designed to ensure policies and procedures are  in place to manage the risks arising within each division.  Application varies in detail from one part of Macquarie to  another; however, the same risk management framework  applies across all business activities.  Credit Risk is defined as the risk of a counterparty failing  to complete its contractual obligations when they fall due.  The consequent loss is either the amount of the loan not  paid back or the loss incurred in replicating a trading  contract with a new counterparty. The RMG Credit team maintains a comprehensive and  robust framework for the identification, analysis and  monitoring of credit risks arising within each business.  Key aspects of this framework are discussed below. The Macquarie and Macquarie Bank Boards are  responsible for establishing the framework for approving  credit exposures. The Boards delegate discretions to  approve credit exposure to designated individuals within  Macquarie whose capacity to exercise authority prudently  has been assessed. Consistent with the concept of Operating Groups owning  risk, specific day-to-day operations are more appropriately  discharged and embedded within the Operating Groups.  This applies particularly to the management of compliance  and operational risk. The majority of these functions are  discharged within the Operating Groups as follows:  To ensure that, on a global basis, risks are managed in a  controlled manner, about half of total RMG staff as at  31 March 2014 were based outside of Australia. All offices  are subject to the same risk management controls and  standards. This is supported by regular staff communication  and visits to international offices.  GLYPH<150> A significant number of RMG Compliance staff are co- located with the business and ensure that day-to-day  compliance obligations are discharged at the business  level. These staff report into their Regional Head of  Compliance and ultimately into the Global Head of  Compliance  GLYPH<150> Business Operational Risk Managers (BORMs) are  appointed by the Operating Group Heads to be their  representative on operational risk management matters,  and act as their delegate in ensuring that operational  risk and standards are addressed appropriately within  their division. BORMs have functional reporting lines to  the RMG divisional Head of Operational Risk. 26  Risk management and monitoring Credit risk (1) Headcount numbers only include permanent, active staff  (full-time and part-time). Figures prior to FY2011 have not  been restated to account for business compliance staff who  joined RMG in FY2011 and FY2013.  Ratio of RMG headcount to total Macquarie$^{(1)}$  Analysis and approval of exposures