Preliminary Final Report/Media Release/Financial Statements

Document date:  Thu 25 Oct 2001
Published:  Thu 25 Oct 2001 13:28:49
Document No:  182866
Document part:  U
Market Flag:  Y
Classification:  Preliminary Final Report , Full Year Accounts , Dividend Record Date , Dividend Pay Date , Dividend Rate 

AUSTRALIA AND NEW ZEALAND BANKING GROUP       2001-10-25  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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RISK MANAGEMENT

ANZ'S RISK MANAGEMENT VISION

Risk management at ANZ is directed to achieve strong risk control,
resulting in no 'surprises' for management and the market and a
distinctive risk management capability, which enables ANZ business
units to meet their performance, growth and 'breakout' objectives.

The identification and effective management of risk is an essential
part of banking. Overall, our risk capabilities are considered to be
a strategic asset and a source of competitive advantage. Through
effective use of technology and strong management focus, we seek to
further strengthen the Group's risk capabilities and culture to
ensure that ANZ remains at the forefront of risk management
capability within the banking sector.

STRATEGIC CONTEXT

The overall strategy of an organisation fundamentally impacts the
level of risk that it takes. Therefore, some of the most important
decisions influencing the underlying risk of an organisation are
those which determine the activities, businesses and regions in which
the organisation engages. Those decisions and all risk management
policies are approved by the Board, with the Board Risk Management
Committee supervising implementation and adherence to policy.
  
In recent years, ANZ has made substantial changes to its strategy and
activities in order to reduce risk and enhance the sustainability of
earnings growth. Examples of these changes include:
* Sale of Grindlays businesses to Standard Chartered Bank 
* Exiting emerging markets bond trading and retail stockbroking 
  activities 
* Restrictions on corporate balance sheet growth - focus on higher
  quality assets and fee income 
* Strong growth in the residential mortgage portfolio 
* Increased emphasis on lower risk Personal Financial Services 
  businesses 
* Reducing the risk profile of the remaining international businesses

These changes have been accompanied by significant enhancement of the
Group's internal risk management systems and processes and more open,
transparent disclosure of risk.

THREE KEY AREAS OF RISK:

1. CREDIT RISK

The potential financial loss resulting from the failure of a
counterparty to honour fully the terms of a loan or contract.

* Policy controls aimed at developing and maintaining a well
diversified credit portfolio are supervised by the Risk Management
Committee. During the year the Group's peak exposure limits to all
categories of corporate customers were reduced to support this
objective
* Major lending decisions require sign-off from an independent credit
risk function as well as the business unit. Larger transactions
require approval by the Credit and Trading Risk Committee of
management and, for the largest transactions, the Risk Management
Committee
* The Group has continued to rebalance its lending portfolio towards
lower risk consumer lending, particularly mortgages. This trend has
been supported by the introduction of advanced behavioural and other
credit scoring technology in Personal Financial Services.

2. MARKET RISK

Risk to earnings arising from movements in interest and exchange
rates and bond, equity and commodity prices.

* The Group Asset and Liability Committee oversees the Group's
balance sheet risk - trading risk is monitored by the Credit and
Trading Risk Committee. Further oversight is provided by the Risk
Management Committee
* There have been no significant structural changes to the Group's
market risk exposures over the last twelve months. Market risk
continues to be managed within conservative bounds

3. OPERATING RISK

Operating risk arises from the potential breakdown of day-to-day
processes.

* ANZ has spent significant time and effort during the past two years
developing advanced operational risk measurement and management
capabilities, with the Group's operational risk economic capital
framework acknowledged as an example of leading practice globally 
* The Operating Risk Executive Committee is responsible for 
development and oversight of operating risk policies 
* A prime responsibility of Business Units is to ensure compliance
with policies, regulations and laws
* Key focus areas over the past year have included fraud
prevention, payments risk management and remote banking security

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