Risk control

Exposure to risk is a fundamental element of Nordnet's operations. It is very important to ensure that exposure to risk takes place under controlled forms. Nordnet’s ambition is for its control environment to be permeated by the company’s ethical values and corporate culture. The ethical guidelines are adopted by the Board and communicated to all employees, as are other governance documents in the form of policies, guidelines and instructions with a view to limiting and controlling the company’s risks and risk exposure. A low risk level and the markets confidence are high priorities for Nordnet. As a consequence of this, Nordnet shall continuously strive to strengthen the risk awareness of the organization and the necessary conditions for good control and follow up with risk owners and controlling units.

The Board at Nordnet holds the overall responsibility for ensuring a good internal control of Nordnet’s operations in accordance with the directives, laws and regulations applicable to its business. This responsibility involves ensuring that there are independent functions for the control and management risks and regulatory compliance and that they report on how the operations are conducted in this respect to the Board and the management. Nordnet’s control functions are Risk Control, Compliance and the independent review function.

The Internal Capital Assessment process is a continuous process that evaluates the capital requirements in relation to Nordnet’s risk profile. The result acts as a guide in the strategic decisions made to retain good capitalization in the long term. An Internal Capital Assessment document is prepared each year and forms the basis for the Board of Directors work with Nordnet’s capital planning. As part of the internal capital assessment, a comprehensive study and analysis is conducted of the risks in the operations. The capital requirement for each risk has been assessed and reviewed in relation to the legal capital requirement, and then the highest amount of the assessed capital requirement and the legal capital requirement was used in the capital assessment. No diversification effects between risks have been adopted.

The risks to which Nordnet is exposed are divided into the following categories:

• Credit risk
• Market risk
• Financing risk/Liquidity risk
• Operational risk
• Concentration risk
• Business risk
• Risks in the insurance operations

For a decription of each one of the above mentioned risks, see the Annual Report of 2011, note 7.