Ministry of education tashkent financial institute department of economics

III. Problems and prospects of formation of financial strategy in DNB ASA Group. Financial analysis and highlights of the DNB group.

DNB is a multinational financial services conglomerate with operations in a number of countries. Several civil authorities have granted the group licenses. The regulations are extremely complex, and the penalties for noncompliance can be severe. The DNB Group is bound by Norwegian and international rules and regulations, as well as local laws and regulations in other countries. Domestically, the group includes the investment bank DNB Markets, the financial company Cresco, the real estate agency DNB Eiendom, and DNB Asset Management, which manages funds for institutional clients in Norway and Sweden. DNB has the most customers in the Norwegian financial market. DNB has over 2.3 million retail customers and over 200,000 corporate customers in Norway, where it operates 61 branches.

Picture 2. Market capitalisation and equity of DNB ASA Group (2017-2021) ⁶

Internal control at DNB consists of the following main components: control environment, risk assessment, control activities, information and communication, and monitoring. This model is based on the European Banking Authorities' Guidelines on Internal Governance and Structure from the Committee Sponsoring Organizations of the Treadway Commission, COSO.

The purpose of the DNB internal control system is to ensure⁷:
1. efficient operations;
2. responsible business operations;
3. sufficient risk identification and measurement, and risk mitigation measures;
4. reliable financial and non-financial information is presented both internally and externally;
5. responsible administrative and accounting procedures;
6. compliance with laws, regulations, supervisory requirements and internal guidelines, processes, organization rules and decisions.
The solution to the described problems is heavily dependent on the company's specifics, as well as its strengths and weaknesses. Nonetheless, certain universal methods for improving a company's strategic competitive position can be used in emerging markets as a compromise that has a significant positive impact on the company's capitalization. In the context of the application of such models, there are two options: either partially and simultaneously mitigate problems at the stages of financial strategy development, or partially compensate for them. However, it does not negate the need for a comprehensive effort to address the aforementioned issues with financial strategy formation in emerging markets.
Responsibility for risk management and internal control is divided into three lines of defense⁸:
- The first line of defense includes all operational units of the function group. The responsibilities of operational leaders include establishing, managing and overseeing internal controls within their own area of ​​responsibility, including processes and activities to achieve defined objectives related to operational efficiency, sound financial reporting, risk management and compliance with regulations and laws. Employees are responsible for exercising established internal controls through their daily work tasks.
- The second line of defense consists of independent and autonomous management functions using an approach to monitoring, reporting and advising on risk-related matters, and compliance with internal control activities carried out by the Group's management and operational functions. At DNB, the second line of defense functions are organized under the Risk Management and Compliance Group.
- The third line of defense is the internal audit service (hereinafter referred to as “Group Audit”), which uses a risk-based approach to review and evaluate the management and internal control processes. The Group Audit is independent of the Group's executive management and reports to the Board of Directors of DNB ASA.
DNB has a contingency hierarchy described in the financial plan. The financial plan is intended to ensure that the Group can resume operations after a major emergency without the involvement or support of the authorities. The financial plan is developed as an integral part of the Group's risk and capital management system and will be activated if predetermined recovery indicators are violated. Violations of the financial indicator will prompt a thorough assessment of the situation and an assessment of appropriate actions. If finance fails, the authorities will take over the operation of the company. The authorities are responsible for developing a plan for this phase.
Independent and effective audits will help ensure satisfactory risk management and internal controls, as well as sound risk and financial reporting. The audit of the Group receives its mandate from the Board of Directors of DNB ASA, which also approves the Group's annual audit plans and budgets. Group audit responsibilities can be broadly divided into two parts:
- On behalf of the Board of Directors of DNB ASA CEO and Boards of Directors of major subsidiaries: ensure the establishment and implementation of adequate and effective risk management and internal controls;
- Assess whether the risk identification is appropriate and the processes and controls are effective in strengthening the Group's ability to achieve its objectives.
The results of internal control over financial reporting are quarterly reported by all divisions to the Financial Group and are monitored on an ongoing basis. The Group Management Team and the Audit Committee receive annual updates.
DNB's annual report contains a statement of the Group's objectives and strategy, and the market is constantly updated through investor presentations in connection with quarterly financial statements, capital markets days and presentations on special topics. The Board's Risk Management Committee elects up to four Committee members from among Board members elected by shareholders and are appointed by the Chairman of the committee. In the Risk Management Committee, at least one member must have experience in identifying, assessing and managing risk exposure in large complex companies. The Committee must ensure that the Group and its divisions have satisfactory risk management procedures.