Bank of Montreal 2012 Annual Report Download - page 78

MD&A
Enterprise-Wide Risk Management
As a diversified financial services company active in banking, investment, insurance and wealth management services,
we are exposed to a variety of risks that are inherent in carrying out our business activities. Having an integrated and
disciplined approach to risk management is key to the success of our business. In order to achieve prudent and
measured risk-taking that aligns with our business strategy, we are guided by a risk management framework that is
embedded in our daily business activities and planning process. The Enterprise Risk and Portfolio Management (ER&PM)
group develops our risk appetite, risk policies and limits, and provides independent review and oversight across the
enterprise on risk-related issues.
“Putting our risk management principles into
practice is crucial to our company’s risk culture.
At BMO, all employees are accountable for their
risk decisions.”
Surjit Rajpal
Executive Vice-President and Chief Risk Officer
BMO Financial Group
Strengths and Value Drivers
‰Unified and strong risk culture that is embedded across the enterprise.
‰Risk appetite that shapes business strategies and is integrated into
our decision-making processes.
‰Independent risk management practices and oversight.
‰Robust risk management framework and disciplined approach that
addresses risks throughout the organization.
Challenges
‰Increasing volume and complexity of regulatory requirements and
expectations.
‰Continued volatility in global economic conditions, causing heightened
marketplace uncertainty.
‰Intensifying competitive pressures.
Our Priorities
‰Sustain our strong risk culture across the enterprise, with con-
tinued focus on maintaining risk independence and effectiveness
of our review and oversight.
‰Broaden and strengthen risk capabilities, including enhancing our
stress testing functions to deliver better insights to both our risk
and business groups.
‰Enhance our risk management infrastructure and technology
platform to support increased capabilities and efficiency.
‰Manage regulatory risk effectively.
‰Strive to continuously improve our risk management function,
ensuring consistency across the organization.
Our Path to Differentiation
‰Promote excellence in risk management as a defining character-
istic of BMO, both internally and externally.
‰Within our independent oversight framework and the limits of
our risk appetite, contribute to the enterprise’s customer focus.
‰Proactively benchmark our capabilities against risk management
best practices.
‰Maintain a rigorous credit qualification process.
‰Foster a high-performance risk culture through educational
training programs and rotational opportunities.
‰Provide leadership in the management of enterprise risk and
emerging risk-related industry concerns.
Key Performance Indicators 2012 2011 2010
BMO
Peer
avg. (1) BMO
Peer
avg. BMO
Peer
avg.
Specific provisions for
credit losses (PCL)
as a % of average net
loans and acceptances 0.31 0.36 0.52 0.40 0.61 0.54
Adjusted PCL
as a % of average net
loans and acceptances 0.21 0.36 0.54 0.40 0.61 0.54
Total PCL as a % of
average net loans
and acceptances 0.31 0.38 0.56 0.40 0.61 0.52
2010 based on CGAAP.
(1) Calculated based on information available and estimates used.
Adjusted results in this Enterprise-Wide Risk Management section are non-GAAP and are discussed in
the Non-GAAP Measures section on page 98.
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 2012 annual consolidated finan-
cial statements. They present required disclosures as set out by the International Accounting Standards Board in IFRS 7 Financial Instruments – Disclosures, which permits
cross-referencing between the notes to the financial statements and the MD&A. See Note 1 on page 124 and Note 6 on page 134 of the financial statements.
BMO Financial Group 195th Annual Report 2012 75