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Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA)

This overview of Enterprise Risk Management (ERM) in ABN AMRO Business Unit North America highlights the importance of integration and provides insights on effective Key Risk Indicators (KRIs), ERM dashboards, and the hallmarks of success in ERM.

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Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA)

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  1. Enterprise Risk Management (ERM)ABN AMRO Business Unit North America (BU NA) Overview for ERM Committee April 11, 2007

  2. Table of Contents 1 ERM is all about integration • Four stages of the ERM Process 2 3 Characteristics and sources of effective KRIs 4 An ERM Dashboard should address 5 key questions 5 Hallmark of success in ERM

  3. ERM is all about integration • Risk factors – strategic, business, credit, market and operational • Oversight – governance, risk and compliance • Analytical models – data standards, modeling, assumptions, stressed scenarios • Information flows – risk vs. performance; internal vs. external • Business processes – strategic planning, M&A, product development, pricing, performance measurement Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

  4. Four stages of the ERM process ERM Foundations Risk Identification & Assessment Risk Measurement and Reporting Risk Mitigation and Management • Governance structure • Resource allocation • ERM Framework • Risk policies • Incentive systems • Education & Training • Top-down risk assessments • Bottom-up risk assessments • Audit reviews • Independent assessments (regulators, consultants, customers) • KRIs • Performance vs. Standards • Dashboard reporting (Management, Board) • Public disclosure • Resolution of issues • Product & Customer Management • Risk-adjusted pricing • Investment, funding & capital strategies • Risk transfer Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

  5. Characteristics and sources of effective KRIs Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

  6. ERM Dashboard should address 5 key questions • Are any of our business objectives at risk? • Are we in compliance with policies and regulations? • What risk incidents have been escalated? • What KRIs and trends require immediate attention? • What risk assessments need to be reviewed? Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

  7. Hallmark of success in ERM • “Tone from the top” – engaged senior management and Board of Directors • Establishment of policies, systems and processes – supported by a strong risk culture • Clearly defined risk appetite with respect to risk limits and business boundaries • Robust risk analytics - summarized in an “ERM Dashboard” for executive and Board reporting • Risk-return management via integration of ERM into strategic planning, business processes, performance measurement and incentive compensation Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

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