Goldman Sachs 2000 Annual Report Download - page 41

knowledge of the primary sources of risk in their individual
markets and the instruments available to hedge our
exposures.
In addition, a number of committees are responsible for
establishing trading limits, for monitoring adherence to
these limits and for general oversight of our risk manage-
ment process. These committees, which are described
below, meet regularly and consist of senior members of both
our revenue-producing units and departments that are
independent of our revenue-producing units.
Management Committee. All risk control functions ulti-
mately report to the Management Committee. Through both
direct and delegated authority, the Management Committee
approves all of Goldman Sachs’ operating activities, trading
risk parameters and customer review guidelines.
Risk Committees. The Firmwide Risk Committee:
• reviews the activities of existing businesses;
• approves new businesses and products;
• approves divisional market risk limits and reviews
business unit market risk limits;
• approves inventory position limits for selected country
exposures and business units;
• approves sovereign credit risk limits and credit risk
limits by ratings group; and
• reviews scenario analyses based on abnormal or
“catastrophic” market movements.
The FICC and Equities Risk Committees set market risk limits
for their respective product lines based on a number of
measures including Value at Risk (VaR), scenario analyses
and inventory levels. The Asset Management Control
Oversight and the Asset Management Risk Committees
oversee various operational, credit, pricing and business
practice issues.
Global Compliance and Control Committee. The Global
Compliance and Control Committee provides oversight of
our compliance and control functions, including internal
audit; reviews our legal, reputational, operational and
control risks; and periodically reviews the activities of
existing businesses.
Commitments Committee. The Commitments Committee
approves equity and non-investment-grade debt under-
writing commitments, loans extended by Goldman Sachs,
and unusual financing structures and transactions that
involve significant capital exposure. The Commitments
Committee has delegated to the Credit Department the
authority to approve underwriting commitments for invest-
ment-grade debt and certain other products.
Credit Policy Committee. The Credit Policy Committee
establishes and reviews broad credit policies and parame-
ters that are implemented by the Credit Department.
Operational Risk Committee. The Operational Risk Commit-
tee, created in fiscal year 2000, provides oversight of our
ongoing development and implementation of operational risk
policies, framework and methodologies and monitors the
effectiveness of operational risk management.
Finance Committee. The Finance Committee is responsible
for oversight of our capital, liquidity and funding needs and
for setting certain inventory position limits.
Segregation of duties and management oversight are fun-
damental elements of our risk management process. In
addition to the committees described above, departments
that are independent of the revenue-producing units, such
as the Firmwide Risk, Credit, Controllers, Global Operations,
Central Compliance, Management Controls and Legal
departments, in part perform risk management functions,
which include monitoring, analyzing and evaluating risk.
Furthermore, the Controllers Department, in conjunction
with the Firmwide Risk Department, independently reviews,
on a regular basis, internal valuation models and the pricing
of positions determined by individual business units.
Risk Limits
Business unit risk limits are established by the various risk
committees and may be further allocated by the business
unit managers to individual trading desks.
Market risk limits are monitored on a daily basis by the
Firmwide Risk Department, and are reviewed regularly by the
appropriate risk committee. Limit violations are reported
to the appropriate risk committee and the appropriate
business unit managers.
Inventory position limits are monitored by the Controllers
Department and position limit violations are reported to the
appropriate business unit managers, the Finance
Committee and the appropriate risk committee.
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