Bank of Montreal 2014 Annual Report Download - page 69

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Accuracy and Completeness of Customer and
Counterparty Information
When deciding to extend credit or enter into other transactions with
customers and counterparties, we may rely on information provided by
or on behalf of those customers and counterparties, including audited
financial statements and other financial information. We may also rely
on representations made by customers and counterparties that the
information they provide is accurate and complete. Our financial
results could be adversely affected if the financial statements or other
financial information provided by customers or counterparties are
materially misleading.
Caution
This Risks That May Affect Future Results section and the remainder of this Enterprise-Wide Risk
Management section contain forward-looking statements.
Other factors beyond our control that may affect our future results are noted in the Caution
Regarding Forward-Looking Statements on page 29. We caution that the preceding discussion of
risks that may affect future results is not exhaustive.
Framework and Risks
Risk Culture
Risk
Governance Risk
Principles Risk Appetite Risk Review
and Approval
Risk
Monitoring
Credit and
Counterparty
Market Operational Business Model Strategic ReputationLiquidity and
Funding
Insurance Legal and
Regulatory
Environmental
and Social
Our enterprise-wide risk management framework consists of our
operating model and our risk governance structure, both of which are
underpinned by our strong risk culture. Our robust framework provides
for the management of each individual risk type: credit and counter-
party, market, liquidity and funding, operational, insurance, legal and
regulatory, business, model, strategic, reputation, and environmental
and social.
Our framework is anchored in the three-lines-of-defence approach
to managing risk, which is fundamental to our operating model, as
described below:
Three Lines of Defence Responsibilities
First Line
‰Operating groups, which own the risk in
their operations
‰Own, measure and manage all risks in their lines of business.
‰Identify, monitor, quantify and report risks arising from their operating activities and initiatives.
‰Establish appropriate internal control structures in accordance with our risk management
framework.
‰Pursue suitable business opportunities within their established risk appetite.
‰Act within their delegated risk-taking authority as set out in established corporate policies.
Second Line
‰Enterprise Risk and Portfolio Management
(ERPM) group
‰Corporate Support areas
‰Provide independent oversight, effective challenge and independent assessment of risk.
‰Set enterprise risk management policies and establish infrastructure, processes and practices
that address all significant risks across the enterprise.
‰Independently assess, quantify, monitor, control and report all significant risks.
Third Line
‰Corporate Audit Division
‰Provide independent assessment as to the effectiveness of internal control within the enter-
prise, including control, risk management and governance processes that support the enterprise,
its objectives and the Board of Directors’ discharge of its responsibilities.
80 BMO Financial Group 197th Annual Report 2014