The Board is responsible for establishing and monitoring the strategic direction and performance of the Group, within a framework of prudent controls.
STM has formally adopted the Quoted Companies Alliance Code for Small and Mid-sized Quoted Companies (the “Code”) and remained compliant with the Code throughout 2020. We set out below how the Directors have applied the Principles, and the
spirit, of the Code.
STM’s strategy is to be the pensions and life assurance provider of choice in our chosen markets. Through organic growth, product development and targeted acquisitions, the Group will continue to leverage our reputation for product innovation
and service to build sustainable, recurring revenues within a framework of sound governance and risk management.
Our business model is to:
- provide a range of innovative pension solutions to customers across our target markets;
- promote our Pensions Administration and associated Life Assurance products to internationally mobile individuals with a focus on those that have previously worked in the UK;
- focus on high growth, well-regulated markets;
- operate the highest levels of service to both its customers and financial intermediaries in all jurisdictions;
- to embed a culture of customer service, compliance and sound internal controls to build a sustainable, ethical business;
- differentiate itself from its UK competitors by being able to understand the more complex requirements of the UK expatriate market;
- differentiate itself from its International competitors through service levels, and a more comprehensive product / jurisdictional offering;
- to identify and promote products, through its intermediary partners, to UK residents.
The Board has adopted a three-year strategy which includes:
- focus our business on the life and pensions sector;
- increase the introducing intermediary network;
- diversification of the pensions and life product range;
- increase our UK regulated products offer to UK residents as well as the expat market;
- improve margins and the customer journey through efficiency and technology;
- seek opportunistic acquisition targets for both QROPS integration, as well as expansion in niche areas of the Pension and Life markets;
- pro-actively engage with key stakeholders, including shareholders and regulators.
The Board is ultimately responsible for the Group’s risk management framework. Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take.
The Group operates a formal risk management framework which has been embedded across the Group and is overseen and monitored by the Board. In addition, the Board has adopted a formal risk appetite statement against which our strategy, business model and capital projects are tested and assessed.
The risk management function oversees the risk management framework day to day and is responsible for the implementation of risk management policies and processes throughout the Group. The compliance function in each jurisdiction provides assurance to the Group Audit & Risk Committee on regulatory and reputational risk through the completion of an annual compliance monitoring plan.
The Audit and Risk Committee meet not less than quarterly and formally report to the Board on risk across the Group.
Further assurance that our risk management processes are embedded and operating effectively is achieved via a rigorous internal audit regime which is overseen by the Audit and Risk Committee.
The Directors have carried out an assessment of the principal risks facing the Group:
|Area||Description of risk||Examples of mitigating activities and factors||Change from prior year|
|Distribution and market demographics||Our markets are serviced by a limited number of intermediaries and product providers thus creating a competitive environment.||No change|
|Reputational risk||A circumstance could arise which would adversely impact on the Group’s reputation, including adverse publicity from the activities of legislators, pressure groups and the media.||No change|
|Regulatory Risk||Loss arising from regulatory changes in the markets within which the Group operates or breach of existing laws and regulation. ||No change|
|Key personnel||The Group could be adversely affected if there was a loss of key personnel or an inability to recruit individual with the appropriate skills set.||No change|
|Geopolitical risks||The Group could be adversely affected by changes in existing legislation, fiscal policy or political factors, such as Brexit.||No change|
|Non-performing investments||The Group recognises that the UK SIPP industry is becoming more litigious over non-performing assets and that STM also has an exposure to QROPS’ non-performing assets. The Group could therefore be adversely affected by this.||No material change in quantum of non-performing assets. Legal and regulatory environment continues to tighten.|
|Appeal judgment in Adams v Carey case||The Group acknowledges that whilst the Court of Appeal upheld the High Court’s ruling on COBS it ruled against Carey (now Options) on s27 of the Financial Services Market Act 2000 (FSMA) and refused to exercise its discretion under s28 to disapply the effect of s27. This could have an impact on claims made against the business as well as reputational damage.||New risk|
Impact on sales and operations due to office closures, travel restrictions and the loss of personnel due to potential 'self-isolation'Potential impact on revenue due to economic uncertainty, declining asset valuations and interest rates
|Operational changes are embedded and impact now clearer, with a return to a form of business as usual anticipated in the coming months. The risk remains but has reduced.|
|Technology disruption||The Group could suffer operational disruption in the event of technology disruption such as a cyber-attack or hardware failure.||Cyber threat has intensified. Steps taken to mitigate risk, particularly around remote working practices.|
The Group has exposure to the following financial risks:
|These risks are addressed within Note 26 of the financial statements||No change|
The Board is responsible to shareholders for the proper management and governance of the Group. It is responsible for strategic planning, business acquisitions and disposals, risk management, authorisation of major capital expenditure and material contractual
arrangements, setting policies for the conduct of business and approval of budgets and financial statements.
The Chairman is responsible for over-seeing the development and implantation of the Company’s strategy, its governance framework and Board effectiveness. The Chief Executive is responsible for delivery of the strategy and the day-to-day management
of the Group by the senior executive team. The Board is committed to continually developing the corporate governance and management structures of the Group to ensure they adapt to the changing needs of the business. The non-executive directors are
considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgment.
The non-executive directors provide independent oversight and challenge to the Board and bring experience at a senior level of business operations and strategy. The Company Secretary is responsible for ensuring that Board procedures are observed and the
Company’s obligations as an entity listed on the London Stock Exchange are met.
The Board comprises an appropriate balance of industry, finance and public market skills and experience, as well as an appropriate balance of personal qualities and capabilities to successfully oversee and challenge the Group’s strategy. The Company
fully supports and funds any training, formal or otherwise, that is required by any individual Board member so as to ensure that their knowledge and experience remains relevant and effective.
An internal review of Board effectiveness, led by the Chairman, was carried out in February 2021 by means of a questionnaire and one-to-one sessions. The review identified that the Board worked well, with Board meetings considered effective. A need was
identified to allow more time to discuss strategy and ad hoc items requiring debate. The review also identified that more frequent interaction between meetings, outside the Boardroom environment, would be beneficial. These proposals have been addressed
by means of an expanded Board agenda and, when Covid restrictions permit more informal one-to-one interaction, outside the Board cycle.
The Board promotes a culture that is based on sound ethical values, standards and behaviours. This culture is visible in the Board’s actions and decisions, as well as those of the executives and senior management team. These corporate values guide
the objectives and strategy of the business and form the backbone of our Code of Conduct policy. Our long-term growth expectations are underpinned by the principles within this Code of Conduct.
The Group promotes a ‘customer first’ ethos which is at the heart of decision-making processes, aligned to a positive and pro-active relationship with our stakeholders.
This culture has been communicated to all employees and is reinforced by the training program which all staff participate in. This starts with the Code of Conduct forming part of any new member of staff’s induction program, and the application of
the Code of Conduct is considered as part of all STM employees’ annual appraisal process.
The Board comprises three executive and four independent non-executive directors (including the Chairman). The independence of directors is assessed periodically as part of the Board evaluation process. All non-executive directors have been appointed
from outside the STM Group and are considered independent as defined by the Code.
The Board meets at least six times during the year. To enable the Board to discharge its duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance of the Board meetings. There is a formal
agenda followed at all Board meetings which ensures discussions and decisions to be made on all strategic, financial and operational matters affecting the business.
The Board has established an Audit & Risk Committee and a Remuneration Committee, both with formally delegated duties and responsibilities. The Directors do not consider that, given the size of the Board, it is necessary at this stage to have a Nomination
Committee. Succession planning is carried out by the Board. The Audit & Risk Committee comprise Malcolm Berryman (Chairman), Robin Ellison and Graham Kettleborough. The Remuneration Committee comprises all the non-executive directors, with Malcolm
Berryman as Chairman.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee reviews the integrity of the financial statements of the Group, announcements relating to financial performance, accounting policies, the application of critical accounting judgments and practices, the operation of internal
controls and the effectiveness of the financial reporting policies and systems. It is responsible each year for satisfying itself on the independence and objectivity of external auditor. The Audit & Risk Committee meets at least four times
a year and at such other times as the Chairman of the Committee sees fit. The Chairman of the Committee is appointed by the Board.
In 2020, the Audit & Risk Committee reviewed the Group’s risk appetite and risk framework, its policies, methodologies, systems, processes and procedures and the monitoring of all these areas (through a three-lines of defense model, the first
line being the business systems and controls in place to prevent and detect errors, the second provided by compliance monitoring and the third by internal audit review). The Group’s risk management capabilities continue to evolve and refine,
providing local- level risk management and Group level oversight.
The Audit & Risk Committee has primary responsibility for the Group’s Risk Appetite Statement which sets out the Group’s attitude to risk and the limits of acceptable risk taking. The Committee has established the high-level qualitative
Risk Appetite Statement for the Group and requires the Subsidiaries to link their own Risk Appetite to the Group. The subsidiaries are required to identify and manage Key Risk Indicators. The statement is subject to annual review by the Audit &
Risk Committee and the Group Board. The Committee makes recommendations to the Board in respect of any risks faced by the Group outside of its declared risk appetite.
The Audit & Risk Committee is responsible for the Risk Framework with all risks identified being recorded in the Corporate Risk Register and reviewed by the Committee on a biannual basis.
The duties of the Committee are to:
- determine and agree with the Board the policy for the remuneration of the Chairman, Executive Directors and other members of the Group Executive team;
- determine individual remuneration packages including bonuses, incentive payments, share options and any other benefits;
- determine the contractual terms on termination and individual termination payment;
- be informed of and advise on changes in benefit structures in the Group; and
- agree the policy for approving expense claims of the Chief Executive and the Chairman of the Board.
The Committee meets at least twice in each year and at such other times as the Chairman of the Committee sees fit. The Chairman of the Committee is appointed by the Board.
The Committee met three times in 2020. Key areas of focus included the 2019 bonus out-turn, 2021 bonus targets and consideration of a potential senior management share incentive plan.
Meeting attendance for the year ended 31 December 2020 was:
|Board||Audit & Risk||Remuneration|