GE 2015 Annual Report Download - page 143

RISK MANAGEMENT
GE 2015 FORM 10-K 115
GE &DSLWDO¶V Corporate Risk function, in consultation with the ERMC, updates GE &DSLWDO¶V Enterprise Risk Appetite Statement
annually. This document articulates the enterprise risk objectives, its key universe of risks and the supporting limit structure. GE
&DSLWDO¶V risk appetite is determined relative to its desired risk objectives, including, but not limited to, credit ratings, capital levels,
liquidity management, regulatory assessments, earnings, dividends and compliance. GE Capital determines its risk appetite through
consideration of portfolio analytics, including stress testing and economic capital measurement, experience and judgment of senior risk
officers, current portfolio levels, strategic planning, and regulatory and rating agency expectations.
The Enterprise Risk Appetite Statement is presented to the GE Risk Committee and the GE Capital Board for review and approval at
least annually. On a quarterly basis, the status of GE &DSLWDO¶V performance against these limits is reviewed by the GE Risk Committee,
the GE Capital Board and the ERMC.
GE Capital monitors its capital adequacy including through economic capital, regulatory capital, scenario analysis and enterprise stress
testing methodologies. GE &DSLWDO¶V economic capital methodology uses internal models to estimate potential unexpected losses
across different portfolios with a confidence level equivalent to an A credit agency rating. GE Capital is also subject to the )5%¶V capital
adequacy framework using the standardized approach to calculate risk-weighted assets, and it uses scenario analysis and stress
testing for risk, liquidity and capital adequacy assessment and management purposes and as an integral part of GE &DSLWDO¶V overall
planning processes. Scenario analysis and stress testing results inform key strategic portfolio decisions such as the amount of capital
required to maintain minimum expected regulatory capital levels in severe but plausible stresses,capital allocation, assist in developing
the risk appetite and limits and help in assessing product specific risk to guide the development and modification of product structures.
The GE Risk Committee and the GE Capital Board review these results and their expected impact on capital levels and metrics. The
GE Risk Committee and the GE Capital Board are responsible for overseeing overall capital adequacy, and the capital adequacy
process, as well as approving GE &DSLWDO¶V annual capital plan and capital actions. If GE Capital is still a non-bank SIFI on January 1,
2018, it will also become subject to stress testing and capital planning requirements under the )5%¶V more formal comprehensive
capital analysis and review (CCAR) regulations, enhanced leverage ratio requirements, enhanced governance requirements, daily
liquidity calculations, additional reporting requirements and a market terms requirement for transactions between GE and GE Capital.
For additional information about our risks, see the Risk Factors, Regulations and Supervision and Critical Accounting Estimates
sections within the MD&A.
GE 2015 FORM 10-K 115