Strategic risk results from external factors and inadequate senior management processes that could lead to a significant failure of the effectiveness of the strategy of the group as a whole, or of its divisions and businesses. This risk is mitigated by the group having a well established reporting structure for agreeing strategy, risk appetite, planning and budgets. Detailed monthly group management accounts are produced and variances and trends are closely monitored. Divisional heads report to the group board each month on the performance of, and key issues affecting, their division. Detailed budgets and three year plans, which are based upon group strategy, are stress tested to take account of potential adverse conditions and are subject to rigorous challenge at divisional and board level to ensure that the group has adequate capital to meet its business and regulatory needs.