Risk Management at Wachovia Putting ERM into Practice

1. Risk Management at Wachovia Putting ERM into Practice NC State University Don Truslow, Chief Risk Officer September 22, 2006

2. Agenda Wachovia Overview Risk Management � Grounded in Vision and Values Key Risks Facing the Financial Industry Wachovia�s Approach to �ERM� Governance Process Technology People Challenges and Learnings

5. Wachovia Vision & Values

6. What is Risk? Risk is the uncertainty around an expected outcome. Uncertainty affected by controllable and uncontrollable factors The higher the level of uncertainty, the higher the level of risk Risk is present in nearly every aspect of life In business, risk/uncertainty/volatility ultimately affect a firm�s ability to crate value Risk Management encompasses the processes, disciplines, and actions intended to reduce (minimize) or offset (mitigate) the uncertainty around an expected outcome.

8. Informed, measured and disciplined risk takers Maintain a relatively low level of volatility around earnings growth aspiration over time What is Our Target Risk Environment?

9. Where does Risk Management fit?

10. Categorization of Risk Three Broad Groupings Credit � Failure to be repaid monies owed to Wachovia Market � Decline in the net value of Wachovia�s assets less its liabilities due to price/interest rate changes in the market Operational � Loss arising from the failure of processes, systems, people or due to external events

11. What is Operational Risk?

12. What is the Fastest Growing Area of Risk At Wachovia?

15. Risk Management Governance Structure

16. Risk Management Organization

20. Top Risks Anti-Money Laundering Compliance Safeguarding Sensitive Customer Data Information Security/Access Control Implementation Risk Vendor Risk (includes outsourcing/off-shoring) Concentration Risk � Credit Strategic/Business Risk Event Risk (markets suddenly become illiquid) New Product Complexity

21. Evolving Risk Culture Risk Management is a strong part of the company�s DNA Considered by all functions at all levels of the organization Factored into management decision-making Risk Management keeps our company on track to achieving the vision Avoid major pitfalls Risk Management is a value added business partner Help business lines leverage strategic opportunities Ensure appropriate levels of risk and return

22. Challenges to ERM Disparate risk types Measurement Clearly defining the risk appetite Competing priorities Balancing regulatory view and business view Ensuring both infrastructure investment and business investment Internal governance overlap

23. Summary Effective Risk Management = competitive advantage Risk Management is grounded in the company�s vision and core values Critical to define the company�s desired outcome and risk appetite Oversight and independence are key to living within risk appetite Governance, Process, Technology all play a key role � but People/Culture are Critical

24. Q & A