Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA) - PowerPoint PPT Presentation

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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 “