Citibank 2012 Annual Report Download - page 94

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MANAGING GLOBAL RISK
Risk Management—Overview
Citigroup believes that effective risk management is of primary importance to
its overall operations. Accordingly, Citi’s risk management process has been
designed 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 business
ownership and accountability for risks with well-defined independent risk
management oversight and responsibility. Citi’s risk management framework
is based on the following principles established by Citi’s Chief Risk Officer:
•฀ 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;
•฀ a common risk capital model to evaluate risks;
•฀ expertise, stature, authority and independence of risk managers; and
•฀ risk managers empowered 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 identify, measure
and aggregate risks, and it must establish risk tolerances based on a full
understanding of “tail risk.”
•฀ “Shared responsibility” means that risk managers must own and
influence business outcomes, including risk controls that act as a safety
net for the business.
•฀ “Individual accountability” means that all individuals are ultimately
responsible for identifying, understanding and managing risks.
The Chief Risk Officer, 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.
The positions of Product Chief Risk Officers are established 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.
Each of the Business, Regional and Product Chief Risk Officers report
to Citi’s Chief Risk Officer, who reports to the Head of Franchise Risk and
Strategy, a direct report to the Chief Executive Officer.