REG - CAB Payments Hldgs - Annual Report 2023 and Associated Documents
05/04/2024 13:00
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RNS Number : 5383J CAB Payments Holdings PLC 05 April 2024
CAB Payments Holdings plc
("CAB Payments", the "Group" or the "Company")
Annual Report 2023 and Associated Documents
CAB Payments announces that its Annual General Meeting will be held on
Thursday 9 May 2024 at 2.00pm at The News Building, 3 London Bridge Street,
London SE1 9SG.
In compliance with Listing Rule 9.6.1R, the following documents have today
been submitted to the National Storage Mechanism and will shortly be available
for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
- Annual Report 2023
- Notice of 2024 Annual General Meeting
- Form of Proxy for 2024 Annual General Meeting
The Annual Report 2023 and Notice of 2024 Annual General Meeting are also
available in the Investors section of the CAB Payments Holdings plc website at
https://cabpayments.com/investors (https://cabpayments.com/investors) .
A condensed set of the financial statements for the year ended 31 December
2023 together with information on important events that occurred during that
financial year and their impact on the financial statements were contained in
the Preliminary Results announcement made on 26 March 2024. That
information, together with the information set out in the appendices to this
announcement, which is extracted from the Annual Report, constitute the
material required by Disclosure Guidance & Transparency Rule 6.3.5R which
is required to be communicated to the media in full unedited text through a
Regulatory Information Service. This announcement is not a substitute for
reading the Annual Report.
- ends -
Enquiries
Lesley Martin
Company Secretary
cosec@crownagentsbank.com (mailto:cosec@crownagentsbank.com)
Appendices
Appendix A: Responsibility statement
In accordance with Provision 27 of the UK Corporate Governance Code, the
Directors consider that the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides information necessary to enable
shareholders to assess the Company's performance, business model and strategy.
Each of the Directors confirm that to the best of their knowledge:
a) the consolidated financial statements, prepared in accordance
with UK-adopted international accounting standards give a true and fair view
of the assets, liabilities, financial position and profit and loss of the
Company and the undertakings included in the consolidation taken as a whole;
and
b) the Annual Report (including the Strategic Report encompassed
within the 'Overview', 'Strategic Report', 'Performance' and 'Governance'
sections) includes a fair review of the development and performance of the
business, and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
For and on behalf of the Board
Richard Hallett
Chief Financial Officer
25 March 2024
Appendix B: Principal risks and uncertainties
Current context Mitigants and other considerations
1 Business Risk
The risks to the Group arising from: · The Group's business model and operations rely on the continued · The Board and Management periodically review and update the strategic
relationships with a diversified network of counterparties and partners plan, budgets, targets, emerging opportunities and threats.
including liquidity providers, Nostros and clearing agents across a spectrum
of currency markets.
· The business model or strategy proving inappropriate due to
macroeconomics, geopolitical, industry, regulatory or other factors · The Group is highly reliant on established relationships with a · The Board and management track and manage, through governance, a
small number of key banks for clearing USD, GBP and EUR. range of metrics and early warning indicators to highlight emerging risks to
· Adverse events and media coverage that could negatively impact the
performance: these continue to be developed and enhanced.
Group's name and reputation thereby impacting its ability to achieve its · The Group provides access to emerging markets, with a level of
strategic objectives. concentration to sub-Saharan Africa. Significant changes to our partner
network or key markets (e.g. general access, regulatory, economic, or
geopolitical conditions) would have a corresponding impact on the Group's · The Group has a dedicated Network and Partnerships Function, who
business, operations, financial performance and reputation. develop and manage our key local relationships; actions continue to be taken
to ensure these are adequately diversified including key currencies such as
· Potential events may include: USD and GBP. This function also tracks and reports regulatory changes and
geo-political issues in these markets.
- Adjustments in the nature of our partner networks impacting access
to local liquidity or clearing services
- Changes to local economies including market structure (e.g. · The Group has a strategic risk register which tracks the top risks
regulatory/central bank monetary actions); and the corresponding actions planned and underway to mitigate these. This is
reported periodically to the Risk Committee and Executive Risk Committee.
- Economic or political events (e.g. changes in government)
- Translation risk associated with significant strengthening in GBP
relative to USD. · The Group has a medium-term strategy in place to continue
diversifying revenues across geographies, clients and products.
2 Financial crime risk
The risk associated with criminal activity in the form of money laundering, · One of the Group's core offerings is correspondent banking and · To mitigate risks effectively, the Group has implemented strict
terrorist financing, bribery and corruption, sanctions, tax evasion and fraud. payments services. This product is in high demand. It facilitates inclusion onboarding and correspondent banking due diligence processes and procedures,
and allows corporates, individuals and our clients to conduct millions of as well as strong governance and client approval committees.
transactions across the world on a daily basis. However, this type of product
can be more vulnerable to money launderers, fraudsters, tax-evaders and
sanctions breachers.
· A robust country risk framework mitigates the Group's exposure to
high- risk countries. This framework includes complete prohibitions of some
countries and detailed restrictions on others.
· The Group provides its services to clients based in global
jurisdictions, including across Africa, the Americas and Caribbean, the Middle
East, the USA, Canada and Europe.
· Screening and monitoring controls enforce the framework, and the
Group's employees have a strong awareness and understanding of the legal and
regulatory environment in which they operate, including the relevant financial
· Transaction risk focuses on the nature and types of transactions crime prevention provisions.
processed and the inherent exposure it generates.
· On-going programme of investment in antifinancial crime technology
· Our increase in voluntary reports to competent authorities, driven and optimisation of system rule-sets. A new transaction monitoring system is
mainly by the imposition of sanctions against Russia and Belarus during 2022 being implemented in 2024 along with an upgrade to the transactions screening
and 2023, and the resulting complexities of managing the sanctions risk, mean system.
that NBFIs and MSBs are considered higher risk. They are more likely to offer
services to underbanked communities, and to leverage new payment technologies
which present new types of financial crime risks.
· Regular training is delivered to ensure standards are continuously
maintained.
· There is generally a lower level of regulatory oversight and
scrutiny of many NBFIs and MSBs. Trends of recent sanctions relating to
deficiencies in controls of MSBs have been indicative of problems in · A dedicated Risk and Compliance Function provides oversight and
mitigating financial crime risk in the sector. undertakes thematic assurance activity to identify potential gaps and issues.
3 Operational risk
The risk of loss or other non-financial impact, resulting from inadequate or · The Group is exposed to operational risk in executing its core · The Group has an established Group Operational Risk Management Policy
failed internal processes, people and systems, or from external events. business activities and seeks to manage this exposure in a cost-effective that details various tools that support the identification, assessment,
manner. management and reporting of operational risk, linked to the Group ERMF.
· The Group is alert to the fact that operational risk has a broad
remit, covering processes, people, systems and external events. It therefore
has a risk appetite set at Level 2 risk types. The top level 2 risks at this · The RCSAs are performed at a business unit level. All risks and
level are: controls are stored centrally within the Group's approved GRC system. The
system has links to risks, controls, issues, assurance actions, Board metrics
- Data management risk: The Group uses data (including personally and other similar information, thus providing a holistic operational risk
identifiable data) in its activities to drive business outcomes. There is a profile.
risk of poor data quality and the requirements of UK General Data Protection
Regulation and the Data Protection Act not being adhered to.
- Execution, transaction processing and delivery risk: The Group · Data management risk: The Group continues to monitor and mitigate
relies on a combination of manual and automated processing to fulfil its data risk through governance structures. Data risk is assessed through the
obligations to its clients. Specific clients have bespoke processes that are RCSA process at least once per calendar year.
performed by a select few. The Company as a listed entity needs to comply with
the Listing Rules of the UK Listing Authority (the Listing Rules) for the
first time.
· Execution, transaction processing and delivery risk: Processes are
- Technology, information security and cyber risk: The Group relies being documented, and automation considered, to ensure consistency and
extensively on the use of technology, including the inter-relationship between reduction of manual/bespoke processing. To comply with the Listing Rules, the
multiple third-party services, which is central to the processing and Finance team has been strengthened with external subject matter experts, as
operating environment that services its clients. It is therefore imperative required.
that the Group protects its clients, counterparty and employee data from
theft, damage or destruction from cyber-attacks. The Group is acutely aware of
the growing sophistication of cyber-attack threats across the industry.
· Technology, information security and cyber risk: Protecting the
- Outsourcing, vendor management and third party risk: The Group is Group's clients, counterparties, suppliers and employees remains a top
reliant on material vendors to support its technology infrastructure, priority. The Group is working on obtaining ISO 27001 and Cyber Essentials
architecture and certain applications. It is fully aware of the risks this accreditation. The Group has recently completed a disaster recovery exercise
reliance creates in delivering its products and services. The Group works and cyber simulation to continue to strengthen its operational resiliency
closely with these suppliers to ensure the services they provide remain efforts.
resilient.
- People risk: Resource capacity and capability impact all risk-types,
these are monitored frequently to ensure staffing levels reflect the size and · Outsourcing, vendor management and third-party risk: The Group has
complexity of the Group. enhanced its procurement and outsourcing framework and associated policies to
align with the requirements of the outsourcing and third-party risk management
- Operational resilience: The Group has identified its important supervisory statement (SS2/21).
business services and impact tolerance limits that form part of the Group's
risk materiality assessment. This is in line with the PRA supervisory
requirements (SS1/21).
· People risk: The Group deploys a number of attraction and retention
- Clients, products and business practices: The Group considers strategies throughout the employee lifecycle, including hybrid-working and
transformation and change risk within this Level 2 risk type. The Group offers competitive employee benefits.
three key products (see page 22) and there has been little change to them, or
the underlying business practices. However, as the Group grows, the risks
associated with transformation and change are becoming a priority.
· Operational resilience: The Group continues to embed a robust
operational resilience framework and enhance contingency plans for the failure
of key systems, processes and services to ensure a timely recovery.
· Clients, products and business practices: The Group has developed a
New Product and Significant Change Policy that brings together the Group's
transformation and change agenda. Key transformation projects are discussed at
the Operational Risk Committee and the Executive Risk Committee as required.
4 Credit risk
The risk of financial loss arising from a borrower's or counterparty's failure · Credit risk is inherently generated through the Group's banking and · Credit Risk remains a key focus for the Group given the current
or inability to meet their financial obligations in accordance with financing activities; i.e. for example, through trade finance products, macroeconomic environment.
contractual terms working capital overdrafts, Nostro balances etc.
· Risk appetite thresholds are constructed with regard to regulatory
· Counterparty credit risk arises due to FX/Payment related trading requirements and internal assessments included within the ICAAP.
and derivatives activities where counterparties may be unable or unwilling to
meet their financial obligations, including collateral obligations, as they
fall due.
· An established credit policy is in place with portfolio levels
exposure limits and a maximum individual counterparty exposure limit
framework. The Credit Risk Committee provides individual counterparty
· Treasury related activities also generate an element of credit risk approvals and portfolio level oversight.
through its day-to-day placement of funds i.e. money market funds, HQLA
portfolio etc.
· Robust individual credit assessment and monitoring frameworks ensure
that credit risk is managed and mitigated in line with credit management
objectives and risk frameworks.
· Counterparty FX and derivatives transaction risk is mitigated via an
ISDA master agreements and credit support annexes, where suitable.
5 Market risk
The risk of losses occurring from adverse value movements of the Group's · The Group's market risk exposure occurs primarily through FX · An assessment of market risk drivers is conducted as part of the
assets and liabilities; principally relating to FX and interest rates. volatility and IRRBB. ICAAP, and to assess BAU and stressed market risk.
· The economic and financial market uncertainties remain elevated, · Market Risk exposure limits are staggered, to constrain typical
driven by elevated inflation and tightening monetary policy. Disruptive market risk exposure. The Group primarily trades in the FX spot market and
adjustment to higher interest rate levels, deteriorating trade or geopolitical risk appetite limits are set and monitored at both an aggregate and currency
tensions could have implications for FX rates and the value of the Group's level.
Nostro balances. Alternatively, a decline in interest rates may compress net
interest margin across the business.
· Defensive positions are typically taken to the extent that markets
exhibit increased market risk events, such as during national elections.
· Adverse changes in FX rates can impact capital ratios given
elements of the risk-weighted assets exposures are denominated in foreign
currencies.
· Interest rate risk in the banking book is driven by client
deposit-taking, investments in the liquid asset portfolio and funding
activities. The Group executes hedging strategies to ensure a predominantly
· Failure to account for foreign currency movements could result in matched profile and thereby mitigate the majority of the IRRBB risks that
an adverse impact on the Group's regulatory capital and leverage ratios. result from these activities.
6 Regulatory and compliance risk
The risk arising from non-compliance with laws and regulations governing · As the Group continues to grow in terms of increasing size and · Horizon-scanning is conducted to monitor upcoming UK regulatory
financial services institutions in the markets in which we operate. complexity it brings with it a complex legislative and regulatory landscape changes.
thus increasing the risks of legal or regulatory sanctions, material financial
loss and/or reputational damage in the markets in which we operate.
· Responding to any regulatory request promptly.
· Ensuring that we have adequate permissions to operate in certain
markets.
· CAB Payments partners with local providers that are typically
regulated entities or locally licensed.
· The Group consults third-party legal counsel for new territorial
expansions to ensure compliance with local regulations.
7 Capital adequacy risk
The risk of the Group having insufficient quality or quantity of capital, to · The Group's capital ratios can be affected by various business · The Group has robustly defined capital adequacy thresholds,
meet its regulatory capital requirements and internal thresholds to cover risk activities and the failure to meet prudential capital requirements, internal constructed in reference to regulatory requirements and maintain capital
exposures and withstand a severe stress as identified as part of the ICAAP. targets and/or to support the Group's strategic plans. ratios in excess of these.
· The key risk drivers with capital implications are credit risk, · The Group produces an ICAAP at least once each calendar year.
market risk and operational risk, each of which is addressed within its Challenge and oversight of the ICAAP occurs at the Asset & Liability Risk
relevant section. Committee and Risk Committee before approval by the Board.
· Day-to-day capital risk exposure is managed by the Treasury function
with oversight from Asset & Liability Risk Committee and the Group
Treasury Committee, who monitor and manage capital risk in line with the
Group's capital management objectives, capital plan and risk frameworks.
· If the Group were to encounter a significant stress on capital
resources, a Recovery Plan is maintained which includes options to ensure it
can remain sufficiently capitalised to remain viable. Recovery Plan metrics
are regularly monitored and reported against. The Group's Pillar 3 disclosures
contain a comprehensive assessment of its capital requirements and resources
and are published separately on the Group's website.
8 Liquidity and funding risk
The risk the Group cannot meet its contractual or contingent obligations in a · The Group's liquidity ratios (i.e. LCR and Net Stable Funding Ratio · Funding and liquidity risks are managed within a comprehensive risk
timely manner as they fall due. Funding risk is the risk that the Group cannot (NSFR) can be affected by various business activities, either idiosyncratic or framework in reference to regulatory requirements and internal thresholds to
maintain access to a sufficient stable funding base to maintain its liquidity. market wide, that could impact prudential liquidity requirements and ensure there is no significant risk that liabilities cannot be met as they
corresponding business activities, and investor or depositor confidence. fall due.
· The key liquidity risk drivers are depositor outflows, and intraday · CAB produces an ILAAP at least once per calendar year. Challenge and
liquidity requirements. oversight of the ILAAP occurs at the Asset & Liability Risk Committee and
the Risk Committee before approval by the Board.
· The primary metrics used to monitor and assess the adequacy of
liquidity are the Overall Liquidity Adequacy rule (OLAR), the LCR and NSFR.
· Day-to-day liquidity risk exposure is managed by the Treasury
function with oversight from the Asset & Liability Risk Committee and the
Group Treasury Committee.
· Treasury conducts regular and comprehensive liquidity stress testing,
including reverse stress testing, to ensure that the liquidity position
remains within the Board's appetite.
9 Conduct risk
The risk that the conduct of the Group and its staff, towards clients (or in · Clients may suffer detriment due to actions, processes or products · Conduct risk is incorporated into the product approval process.
the markets in which it operates), leads to unfair or inappropriate client which originate from within the Group.
outcomes and results in reputational damage and/or financial loss.
· Complaints are formally registered, investigated and responses
· Conduct risk can arise through: provided.
- the design of products that do not meet client needs; · The Group has a Gifts and Hospitality Policy with an approval and
logging process.
- mishandling complaints where the Group has behaved inappropriately
towards its clients;
- inappropriate sales processes; and · All staff receive annual online training on conduct, ethics and
culture.
- behaviour that does not meet market or regulatory standards.
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