2008

Provident Financial

Corporate Responsibility Report

• Contents
• Introduction
• Governance & management
  • How we manage CR
  • Mission and values
  • Our stakeholders
  • Sustainability assessments
  • Risk management
  • Assurance and audit processes
• Our customers
• Our people
• Our supply chain
• Community
• Environment

governance and management

embedding corporate responsibility within our business

By ensuring that we continue to be organised and committed to managing our impacts through our CR programme, we can differentiate ourselves from other companies in our sector and secure business advantage, deliver long-term value to our shareholders, and contribute to the sustainability of our businesses.

	Targets
2008	Review the corporate policies that relate to the Provident Financial CR programme.	Achieved: A range of CR-related policies were reviewed and amended during 2008.
	Improve Provident’s rating on the sustainability indices (ie BITC CR Index, Dow Jones Sustainability Indices, FTSE4Good).	Not achieved: Provident’s score on the overall BITC CR Index in 2008 fell slightly to 94% (2007: 94.5%).

How we manage CR

Governance
For our CR programme to be effective it is important that it is integrated across the whole business and has management support, from the board of directors and throughout the whole company. The Provident Financial board is accountable for the way we manage the CR issues that are material to our business activities; of the board members, Provident's Chief Executive has responsibility for our overall, group-wide CR programme. Reports, which include CR and community affairs sections, are presented at every board meeting and enable the board to take account of the significance of ESG (environmental, social and governance) matters to the group.

The Provident Financial management committee oversees the group's CR programme on behalf of the board. Since its formation in July 2007, the committee's role has been to ensure that within day-to-day operations our businesses manage the risks and respond to the opportunities which are presented by a group-wide issue such as CR.

In addition to the management committee, there are three key working groups which have been established to address the social, environmental and economic issues that are material to our operations, products and services. These working groups feed into the Provident Financial board either directly, or via the management committee.

The purpose of the Responsible Lending Group is to put in place a framework to manage the issue of responsible lending for both the Consumer Credit Division and Vanquis Bank.

The Corporate Responsibility Working Group guarantees that human resources and supply chain management issues are factored into Provident's CR programme. This allows us to continue addressing workplace issues such as diversity, improved opportunities for our employees to get involved in our community projects, and improved supply chain relationships.

Environmental Working Groups at both the Consumer Credit Division and Vanquis Bank contribute to the development and delivery of the Provident environmental management programme.

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Mission and values

During 2008, we continued to develop our corporate governance structures to ensure that sustainability is at the heart of how we operate, and that social, environmental and economic considerations are aligned with our business objectives.

Following consultation with Provident Financial staff, our group mission and values statement was created which provides the basis for understanding the aims and activities of our business. Our mission and values shape what we do and how we do it, and provide a benchmark against which our business performance can be assessed.

Our mission is to be the UK's leading non-standard lender, acting responsibly and playing a positive role in the communities we serve.

The values will help drive our commitment to CR management, including maintaining high levels of customer satisfaction and investment in the local communities in which our customers, agents and staff live and work. In 2009, our focus will be to embed Provident's values within the business.

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Our stakeholders

Stakeholder dialogue
Our CR programme is constantly developing and evolving. In order to make sure it is developing in the right direction and deals with the right issues, we need to understand the needs, expectations and concerns of the people that matter to our business.

In December 2008, we carried on the tradition of consulting with our stakeholders to obtain feedback on the efficacy of our 2007 CR report and the performance of our CR programme. The meeting was attended by twelve representatives from a range of organisations including the Association of British Insurers, Citizens Advice, Jupiter Asset Management, Henderson Global Investors, Social Market Foundation, and Volunteering England.

The aim of the session was to obtain feedback from stakeholders on the quality and materiality of our CR report and the programme that underpins it. The 2007 report was regarded in a positive light and participants said it showed Provident to be a company committed to taking its environmental and social responsibilities seriously.

More information on the feedback generated by the session and Provident's response to the feedback can be seen in the stakeholder feedback section of our full Corporate Responsibility Report.

We also engage with Government and regulators to understand how changes to legislation will impact on our business activities. We do this by responding to consultations, participating in Government-sponsored projects, and attending meetings with representatives from Government and regulatory authorities.

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Sustainability assessments

We remain committed to maintaining a presence on the world's main sustainability indices and responding to requests for information from socially responsible investors and CR rating agencies. To this end, we continued to be included in the FTSE4Good index and have been selected as members of both the Dow Jones World Sustainability Index and Dow Jones STOXX Sustainability Index.

We also continue to make an annual submission to the Business in the Community Corporate Responsibility Index, which enables us to benchmark our CR management performance against that of our peers, other public and private sector organisations, and CR best practice. The results of our most recent submission to the index were announced in May 2009. Our performance on the overall CR index was 94% (2007: 94.5%).

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Risk management

Provident has a rigorous risk management framework. This is designed to identify risks that could impact the delivery of the group's strategic aims and to ensure that adequate controls and procedures are in place to mitigate these risks.

The Provident board is responsible for the group's overall system of internal control and for reviewing its effectiveness. The board delegates authority to a number of formal sub-committees and groups including the Audit Committee, Risk Advisory Committee and the Executive Committee.

Sub-committees and Groups	Members	Meeting frequency	Responsibilities
Executive Committee	Three executive directors; chaired by the Chief Executive	At least once a week, and more frequently as required	Deals with matters relating to the general running of the group, including: monitoring the weekly performance of the group’s businesses. approving capital expenditure projects and longterm contracts subject to certain limits. approving treasury-related transactions. annually reviewing corporate and accountingpolicies.
Audit Committee	Non-executive directors	Three times a year	Monitors group-wide financial controls Appoints and appraises external auditors Agrees the internal audit plan each year Reviews the internal risk audit reports Reviews the group’s whistle blowing policy Reviews the financial statements, interim reports and preliminary announcements of the group
Risk Advisory Committee (RAC)	Three nonexecutive directors and the Finance Director.	Twice a year	Manages the risk management framework on behalf of the board Keeps the group’s risk registers under review Considers the most important risks facing the group Approves the group’s Internal Capital Adequacy Assessment Process (ICAAP) prior to submission to the board (Provident is required to produce an ICAAP because the business is subject to consolidated supervision by the Financial Services Authority) The RAC delegates a number of responsibilities to the Risk Advisory Group (RAG)
Risk Advisory Group (RAG)	Executive directors, Company Secretary, the Head of Audit and Risk, and the Group Financial Controller	Twice a year	Considers: the extent and nature of the risks facing the group the extent and categories of risk which are acceptable to bear the likelihood of the risk materialising the company’s ability to mitigate any risk the costs of operating particular controls relative to the benefits obtained Reviews the risk registers prepared by the two divisional risk committees Conducts the annual ICAAP Submits a schedule of key risks, divisional key risk registers and the ICAAP to the RAC for review and approval

We conduct an internal audit of our risks annually. The output of this audit forms an annual programme of work which targets and reports on the higher risk areas identified by the group's key risk registers.

For more information on our risk management processes, please refer to the Directors' report in our 2008 Annual Report and Financial Statements or go to www.providentfinancial.com.

Cash bonuses
The board's remuneration committee considers corporate performance on ESG issues when setting the performance conditions for cash bonuses and will use its discretion to ensure that, where appropriate, the management of ESG risks are reflected in the rewards granted to directors and senior management.

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Assurance and audit processes

Provident remains committed to subjecting our CR programme to processes of independent audit and assurance in order to reassure stakeholders that our CR management systems, processes and procedures are well managed and in accordance with legislation and best practice. This also provides reassurance that our reports and any data we disclose are accurate, complete and material.

CR reporting
The commentary and data contained within this report have been independently assured by Corporate Citizenship. In forming an opinion and making comments about our CR reports, Corporate Citizenship has considered the principles of materiality, completeness and responsiveness which underpin the international assurance standard AccountAbility 1000. In addition, Corporate Citizenship checked the CR report to determine whether it is aligned with the Global Reporting Initiative's G3 sustainability reporting guidelines. For more information on the GRI and to view the assurance statement please see pages 72 - 81 of our full Corporate Responsibility Report.

Community assurance and environmental audit
Our community involvement programme has been subject to an external assurance review since 2006. This process assesses our application of the London Benchmarking Group (LBG) model and the effectiveness of the implementation of our community strategy. The LBG model is used as the basis for collecting and reporting our community involvement data. This work is also undertaken by Corporate Citizenship.

Finally, our environmental management system is audited against the requirements of the international environmental standard ISO 14001. This audit work has been carried out by the consultancy firm SEQM since 2006.

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