Citibank 2011 Annual Report Download - page 88

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66
MANAGING GLOBAL RISK
Risk Management—Overview
Citigroup believes that effective risk management is of primary importance
to its overall operations. Accordingly, Citigroup has a comprehensive risk
management process to monitor, evaluate and manage the principal risks
it assumes in conducting its activities. These include credit, market and
operational risks, which are each discussed in more detail throughout
this section.
Citigroup’s risk management framework is designed to balance corporate
oversight with well-defined independent risk management functions.
Enhancements continued to be made to the risk management framework
throughout 2011 based on guiding principles established by Citi’s Chief
Risk Officer:
฀ a common risk capital model to evaluate risks;
฀ a defined risk appetite, aligned with business strategy;
฀ accountability through a common framework to manage risks;
฀ risk decisions based on transparent, accurate and rigorous analytics;
฀ expertise, stature, authority and independence of risk managers; and
฀ empowering risk managers to make decisions and escalate issues.
Significant focus has been placed on fostering a risk culture based on
a policy of “Taking Intelligent Risk with Shared Responsibility, Without
Forsaking Individual Accountability”:
฀ “Taking intelligent risk” means that Citi must carefully measure and
aggregate risks, must appreciate potential downside risks, and must
understand risk/return relationships.
฀ “Shared responsibility” means that risk and business management must
actively partner to own risk controls and influence business outcomes.
฀ “Individual accountability” means that all individuals are ultimately
responsible for identifying, understanding and managing risks.
The Chief Risk Officer, working closely with the Citi Chief Executive
Officer and established management committees, and with oversight from
the Risk Management and Finance Committee of the Board of Directors as
well as the full Board of Directors, is responsible for:
฀ establishing core standards for the management, measurement and
reporting of risk;
฀ identifying, assessing, communicating and monitoring risks on a
company-wide basis;
฀ engaging with senior management on a frequent basis on material
matters with respect to risk-taking activities in the businesses and related
risk management processes; and
฀ ensuring that the risk function has adequate independence, authority,
expertise, staffing, technology and resources.
The risk management organization is structured so as to facilitate the
management of risk across three dimensions: businesses, regions and
critical products. Each of Citi’s major business groups has a Business Chief
Risk Officer who is the focal point for risk decisions, such as setting risk
limits or approving transactions in the business. The majority of the staff in
Citi’s independent risk management organization report to these Business
Chief Risk Officers. There are also Chief Risk Officers for Citibank, N.A. and
Citi Holdings.
Regional Chief Risk Officers, appointed in each of Asia, EMEA and
Latin America, are accountable for all the risks in their geographic areas
and are the primary risk contacts for the regional business heads and local
regulators. In addition, the positions of Product Chief Risk Officers are
created for those risk areas of critical importance to Citigroup, currently real
estate and structural market risk as well as fundamental credit. The Product
Chief Risk Officers are accountable for the risks within their specialty and
focus on problem areas across businesses and regions. The Product Chief
Risk Officers serve as a resource to the Chief Risk Officer, as well as to the
Business and Regional Chief Risk Officers, to better enable the Business and
Regional Chief Risk Officers to focus on the day-to-day management of risks
and responsiveness to business flow.
In addition to facilitating the management of risk across these three
dimensions, the independent risk management organization also includes
the business management team to ensure that the risk organization has
the appropriate infrastructure, processes and management reporting. This
team includes:
฀ the risk capital group, which continues to enhance the risk capital model
and ensure that it is consistent across all business activities;
฀ the risk architecture group, which ensures Citi has integrated systems
and common metrics, thereby allowing Citi to aggregate and stress test
exposures across the institution;
฀ the enterprise risk management group, which focuses on improving Citi’s
operational processes across businesses and regions (see “Operational
Risk” below); and
฀ the office of the Chief Administrative Officer, which focuses on
re-engineering and risk communications, including maintaining
critical regulatory relationships.
Each of the Business, Regional and Product Chief Risk Officers, as well
as the heads of the groups in the business management team, report to Citi’s
Chief Risk Officer, who reports directly to the Chief Executive Officer.