Bank of Montreal 2010 Annual Report Download - page 77

Strengths and Value Drivers
• Comprehensive risk management framework, covering all risks in
the organization.
• Strong credit risk management discipline.
•
Credit portfolios performed well compared to our peers.
• Strong foundation established by our Risk Evolution Program, which
we continue to build on across the enterprise by identifying and
implementing best practices.
•
Effective engagement with our lines of business allows us to appro -
priately understand and properly manage risk.
• Proactive management of our portfolios to maximize recoveries on
problem accounts.
Challenges
• Weak U.S. economic and real estate conditions.
• Uncertainty with respect to how businesses might evolve in what
could be a lower growth environment.
• Increasing regulatory change.
Our Functional Groups
Central Risk Group provides independent oversight and support
in the establishment of enterprise-wide risk management policies,
infrastructure and processes.
Operating Group Risk Areas provide integrated risk oversight to our
business groups in the management of risk in support of the execution
of our business strategies to optimize return on capital.
Tom Flynn
Executive Vice-President and Chief Risk Officer
BMO Financial Group
” Risk trends were generally positive
in 2010 with credit costs down
from 2009 and lower levels of
market volatility.”
Our Priorities
• Manage risk effectively throughout the economic cycle.
• Bring a continuous improvement mindset to risk management
capabilities and maintain a strong risk culture across
the enterprise.
• Enhance risk-based capital management across the enterprise.
• Increase the articulation of our risk appetite across our lines
of business.
•
Maximize the value of our impaired loans and problem accounts.
• Maintain strong relationships with our regulators.
Our Path to Differentiation
• Reinforce our three-lines-of-defence approach to risk manage-
ment, which dictates that operating groups own the risk in
their operations, Risk Management Group, along with other
Corporate Support areas, provides independent oversight as a
second line of defence, and Corporate Audit provides a third
line of defence.
• Within our independent oversight framework and the limits of
our risk appetite, contribute to the Enterprise’s customer focus.
• Promote excellence in risk management as a defining charac-
teristic of BMO, both internally and externally.
• Provide leadership in the management of enterprise risk and
emerging risk-related industry concerns.
Key Performance Indicators 2010 2009 2008
BMO Peer BMO Peer BMO Peer
avg. avg. avg.
Specific PCL as a % of average
net loans and acceptances 0.61 0.58 0.85 0.74 0.61 0.43
Total PCL as a % of average
net loans and acceptances 0.61 0.56 0.88 0.90 0.76 0.48
Net impaired loans
as a % of average net loans
and acceptances 0.78 0.96 0.77 0.93 0.72 0.98
Enterprise-Wide Risk Management
As a financial services company active in banking, investments, insurance and wealth management services,
the management of risk is integral to our business. To achieve prudent and measured risk-taking, we are guided
by an integrated risk management framework in our daily business activities and planning process.
The Risk
Management Group develops our risk appetite, risk policies and limits and provides an independent review and
oversight function across the enterprise on risk-related issues.
MD&A
Text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of the MD&A form an integral part of the 2010 annual consolidated financial
statements. They present required GAAP disclosures as set out by the Canadian Institute of Chartered Accountants (CICA) in CICA Handbook section 3862, Financial Instruments
– Disclosures, which permits cross-referencing between the notes to the financial statements and the MD&A. See pages 114 and 122 of the financial statements.
BMO Financial Group 193rd Annual Report 2010 75