Ally Bank 2012 Annual Report Download - page 56

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Risk Management
Managing the risk/reward trade-off is a fundamental component of operating our businesses. Our risk management program is overseen
by the Ally Board of Directors (the Board), various risk committees, and the executive leadership team. The Board sets the risk appetite across
our company while the risk committees and executive leadership team identify and monitor potential risks and manage the risk to be within
our risk appetite. Ally's primary risks include credit, lease residual, market, operational, insurance/underwriting, country, and liquidity.
• Credit risk — The risk of loss arising from a creditor not meeting its financial obligations to our firm.
• Lease Residual risk — The risk of loss arising from the possibility that the actual proceeds realized upon the sale of returned
vehicles will be lower than the projection of the values used in establishing the pricing at lease inception.
• Market risk — The risk of loss arising from changes in the fair value of our assets or liabilities (including derivatives) caused by
movements in market variables, such as interest rates, foreign-exchange rates, and equity and commodity prices.
• Operational risk — The risk of loss arising from inadequate or failed processes or systems, human factors, or external events.
• Insurance/Underwriting risk — The risk of loss associated with either (i) fortuitous occurrences (e.g., fires, hurricanes, tortuous
conduct) and/or (ii) the failure to consider the frequency of losses, severity of losses or the correlation of losses with multiple
events.
• Country risk — The risk that economic, social and political conditions, and events in foreign countries will adversely affect our
financial interests.
• Liquidity risk — The risk that our financial condition or overall safety and soundness is adversely affected by an inability, or
perceived inability, to meet our financial obligations, and to withstand unforeseen liquidity stress events (see Liquidity
Management, Funding, and Regulatory Capital discussion within this MD&A).
While risk oversight is ultimately the responsibility of the Board, our governance structure starts within each line of business, including
committees established to oversee risk in their respective areas. The lines of business are responsible for executing on risk strategies, policies,
and controls that are fundamentally sound and compliant with global risk management policies and with applicable laws and regulations. The
line of business risk committees, which report up to the Risk and Compliance Committee of the Board, monitor the performance within each
portfolio and determine whether to amend any risk practices based upon portfolio trends.
In addition, the Global Risk Management and Compliance organizations are accountable for independently monitoring, measuring, and
reporting on our various risks. They are also responsible for monitoring that our risks remain within the tolerances established by the Board,
developing and maintaining policies, and implementing risk management methodologies.
All lines of business and global functions are subject to full and unrestricted audits by Audit Services. Audit Services reports to the Audit
Committee of the Board, and is primarily responsible for assisting the Audit Committee in fulfilling its governance and oversight
responsibilities. Audit Services is granted free and unrestricted access to any and all of our records, physical properties, technologies,
management, and employees.
In addition, our Global Loan Review Group provides an independent assessment of the quality of Ally's credit risk portfolios and credit
risk management practices. This group reports its findings directly to the Risk and Compliance Committee. The findings of this group help to
strengthen our risk management practices and processes throughout the organization.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K