Other Groups and Divisions
Chairman's and Managing Director's Report

A network of support areas provides the infrastructure and framework which enables the six Groups to operate.

During the year strong independent risk management continued to be a fundamental part of the way Macquarie does business and a key factor in our success.

Other Groups and Divisions grew considerably during the year, with staff numbers 33 per cent up from last year in support of the Bank's international expansion.

The concentric nature of the organisation chart represents the non-hierachical nature of Macquarie and the role of central risk management.

Risk Management Division (RMD) is an independent, central unit responsible for ensuring all risks are appropriately assessed and managed across the Bank. Its functions are Credit, Finance, Operational Risk and Compliance. The Head of RMD has oversight of Internal Audit jointly with the Board Audit and Compliance Committee (BACC). A full Risk Management Report is contained in the 2006 Financial Report.

Credit minimises the risk of loss arising from failure by counterparties to repay loans or honour contracts. Credit ensures that the identification and assessment of equity exposure risks is complete. Credit is supported by the Data Policy Unit which ensures consistent data standards across the Bank's businesses so that accurate and reliable information is available for risk management and reporting.

Finance ensures that market, funding and liquidity risks are appropriately managed and that aggregate risks across all risk types do not exceed the Bank's economic capability to bear risk. Finance is also responsible for ensuring that the Bank discharges its obligations to the Australian Prudential Regulation Authority (APRA), including compliance with prudential standards and that a constructive relationship is maintained with the regulator.

Operational Risk assesses operational risk from a Bank-wide perspective and ensures that an appropriate framework exists to identify, assess and manage operational risk.

Compliance assesses legal, regulatory and reputational risks from a Bank-wide perspective. The area also minimises and manages compliance risk, overseeing management of these risks by business groups to ensure they are identified and appropriately and consistently addressed.

Internal Audit provides independent assurance to senior management and the BACC on the adequacy and effectiveness of Macquarie 's financial and risk management framework.

RMD is also responsible for leading the implementation of Macquarie 's Basel II Project. Basel II is a new regulatory regime being rolled out around the world, and being implemented by  APRA within Australia. Macquarie is seeking accreditation from APRA as an advanced bank.

The advanced approaches under Basel II place a higher reliance on a bank's internal capital measures and therefore require a more sophisticated level of risk management and risk measurement practices.

The Financial Operations Division supports the Bank's operating areas and management by providing financial control, financial planning and capital management, management reporting and budgeting, divisional accounting services, and international business support.

The Division led the Bank's adoption of International Financial Reporting Standards which applied from 1 April 2005. The Division has also led the upgrade of the Bank's General Ledger system and enhancement in reporting capabilities. This change provides the infrastructure to continue supporting the Bank's international expansion and to handle the increased complexities of the regulatory environment.

The Settlements Division provides timely and accurate confirmation and settlement facilities for a variety of products and currencies for many of the Bank's businesses, while maintaining appropriate operational risk standards.

During the year, the Division continued to refine its risk management strategy in line with improved international standards, implemented Continuous Linked Settlement (CLS) and integrated a local Settlements Team in Los Angeles through the acquisition of Macquarie Cook Energy (formerly Cook Inlet Energy Supply) in the United States .

The Business Improvement & Strategy Division provides consulting services to all business and support areas and manages the Bank's annual strategy review. Services include advice on growth, strategy, organisation design, new product development, process re-engineering, and management of change.

This year the Division advised on projects in Australia , Asia and Europe . Notable achievements include assistance with the Bank's response to Basel II , advice on new businesses in wealth management, derivatives trading, property funds management and public transport, post-acquisition support for aged care and media assets, and advice on new systems and processes for institutional broking and retail businesses.

The Taxation Division provides taxation support to all areas of the Bank, manages the Bank's compliance with taxation legislation and relationships with revenue authorities worldwide. The Division reviews the taxation implications of existing and proposed transactions and structures.

To maximise support to the Bank's international businesses, the Division also has staff located in London , New York and Hong Kong .

The Company Secretarial and Investor Relations Division has responsibility for compliance with certain ASX and Australian Securities and Investments Commission requirements, the Bank's share registry, employee equity schemes, professional risk insurances and Bank-wide corporate governance matters.

The Division includes the Investor Relations function, which oversees the Bank's communications with the investment community and actively works to foster relationships with the Bank's shareholders. Investor Relations has been particularly active in developing its relationships with international shareholders. International shareholders' holdings have more than doubled over the past three years.

Macquarie aspires to be recognised as the leading employer of the best people in the market. Human Resources Division supports business strategy by seeking to attract, recruit, reward and retain the best employees. To achieve this, the Division works closely with business groups, providing operational and consulting services globally.

During the year, the Division focused on initiatives to support the Bank's growth into new locations and continued the development of both online candidate sourcing capabilities and the psychometric assessment framework.

The Business Services Division provides the Bank with a range of business support functions including workspace and lease management, business continuity and security, guest relations, procurement and business information services. The primary focus during the year was increasing the Division's capability to manage and deliver these functions internationally. Key projects included establishing new and expanding existing offices in major locations globally, significantly increasing the capacity and resilience of major data centres, as well as ensuring the Bank's readiness to manage pandemic threats such as avian influenza.

Information Services Division

The Information Services Division (ISD) is responsible for the management of the Bank's technology infrastructure, the support and development of existing business systems, and the delivery and deployment of new systems, technologies and services.

This year, ISD implemented major upgrades to the Bank's core human resources and financial systems, delivering additional functionality to meet the future needs of the organisation. Investment continued in technology infrastructure to support the growth in international businesses and a number of significant business applications were implemented. This included an on-line trading platform for the Equity Markets Group and a new lease management system for Macquarie Capital.

The Quantitative Applications Division continues to provide critical analytical expertise to businesses in the Bank. In particular, the Division tested and endorsed the pricing models of over 40 derivative-related products.

During the year selected courses from the “Macquarie Bank Financial Intelligence Series” were presented in New Zealand, Korea, South Africa, the US, Brazil, Hong Kong and Taiwan. This was in addition to regular courses presented in Australia in partnership with AFMA, and internal Macquarie Bank courses.

The Division also contributed to the finance industry by making three presentations at conferences, and submitting two papers to international publications.

Corporate Communications Division is responsible for protecting and enhancing Macquarie Bank's brand and reputation. The Division oversees the Bank's activities in the following areas, both domestically and in international markets:

• media relations
• government relations
• international and community relations
• brand and marketing
• internal communications
• e-Commerce
• reputation and brand protection
• Macquarie Bank Foundation

Corporate Communications manages a number of Bank-wide committees in brand and marketing, sponsorships and media in order to improve operating effectiveness and gain synergies that  may be available to Macquarie 's businesses in  these areas.

Additional resources were committed in Asia, North America and Europe to support an increasing international presence.