Capital One 2008 Annual Report Download - page 26

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Following are descriptions of our approach to each risk category.
Liquidity Risk is the risk that future financial obligations are not met or future asset growth cannot occur because of an inability to
obtain funds at a reasonable price within a reasonable time.
The Chief Financial Officer is the accountable executive for liquidity risk and serves as the Risk Steward.
Liquidity strength is assessed through balance sheet metrics, and stress testing is used to ensure that Capital One can withstand
significant degradation in the funding markets (particularly in the wholesale funding markets). We regularly evaluate our liquidity
position under various liquidity stress scenarios with the Asset/Liability Management Committee and Finance Committee, providing
recommendations for any necessary actions to ensure our liquidity risk exposure is well managed. Management reports liquidity
metrics to the Finance Committee no less than quarterly. Breaches in liquidity policy limits are reported to the Treasurer as soon as
they are identified and to the Asset/Liability Management Committee at the next regularly scheduled committee meeting, unless said
breach activates the Liquidity Contingency Plan. Breaches are also reported to the Finance Committee no later than the next regularly
scheduled meeting. Detailed processes, requirements and controls are contained in our policies and supporting procedures.
Credit Risk is the risk of loss from a borrowers failure to meet the terms of any contract or failure to otherwise perform as agreed.
There are four primary sources of credit risk: (1) changing economic conditions, which affect borrowers ability to pay and the value
of any collateral; (2) a changing competitive environment, which affects customer debt loads, borrowing patterns and loan terms;
(3) our underwriting strategies and standards, which determine to whom we offer credit and on what terms; and (4) the quality of our
internal controls, which establish a process to test that underwriting conforms to our standards and identifies credit quality issues so
we can act upon them in a timely manner.
The Chief Risk Officer is the accountable executive for credit risk and serves as the Risk Steward. Responsibility for consumer credit
risk is delegated to the Chief Consumer Credit Officer and responsibility for commercial credit risk is delegated to the Chief
Commercial Credit Officer.
We have quantitative credit risk guidelines for each of our lines of business. We conduct portfolio and decision level monitoring and
stress tests using economic and legislative stress scenarios. Credit risk objectives are achieved by establishing a credit governance
framework and by establishing policies, procedures, and controls for each step in the credit process. The Board, Chief Executive
Officer, Chief Risk Officer, Chief Consumer and Commercial Credit Officers, and Division Presidents have specific accountable roles
in the management of credit risk. These include policy approval, creation of credit strategy, review of credit position, and delegation
of authority. Our evolving credit risk position and recommendations to address issues are reviewed by the Credit Policy Committee
and the Board of Directors.
Reputation Risk is the risk to market value, recruitment, and retention of talented associates and a loyal customer base due to the
negative perceptions of Capital Ones internal and external stakeholders regarding Capital Ones business strategies and activities.
The Companys General Counsel is the accountable executive for reputation risk and the Corporate Affairs Executive is the Risk
Steward on behalf of the General Counsel.
Reputation risk is managed and owned by business areas in accordance with our Reputation Risk Policy. The Corporate Affairs
Executive assists business areas in evaluating the reputation risk of new and existing business activities. Each Division President is
responsible for highlighting potential reputational issues and executing appropriate risk mitigation activities. The Corporate Affairs
Executive is responsible for assessing and reporting our aggregate reputation risk, as well as the state of Capital Ones reputation with
specific stakeholder groups, to the General Counsel, Chief Risk Officer, and Risk Management Committee.
Market Risk is the risk that earnings or the economic value of equity will under-perform due to changes in interest rates, foreign
exchange rates (market rates), or other financial market asset prices. Our ability to manage market risks contributes to our overall
capital management.
The Chief Financial Officer is the accountable executive for market risk and serves as the Risk Steward.
The market risk positions of Capital Ones banking entities and the consolidated Company are calculated separately and in total, are
compared to the pre-established limits, and are reported to the Asset/Liability Management Committee and Finance Committee no less
than quarterly. Management is authorized to utilize financial instruments to actively manage market risk exposure. Detailed processes,
requirements and controls are contained in our policies and supporting procedures.