ING Direct 2007 Annual Report Download - page 15

Driving the business, safely
Risk appetite
Risk management is fully integrated into
ING’s daily business activities and strategic
planning. We achieve this through a
transparent disclosure of ING’s risks, along
with a risk strategy that is consistent with
both overall Group strategy and risk
appetite.
The risk appetite – the level of risk the
Group is willing to take – is defi ned by
the Executive Board and measured across
three dimensions:
Earnings at Risk
Capital at Risk
Economic Capital
Business line managers try to maximise
value within these boundaries, while Risk
Management monitors the actual risk
profi le against the risk appetite.
The Risk Dashboard
In September 2007, ING introduced the
‘Risk Dashboard’ (see business case above),
a new risk management tool that gives an
overview of risk in all bank and insurance
businesses, enabling the Executive Board to
take strategic decisions using comparable
risk measures, and to maximise effi cient
capital allocation.
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In 2007 ING introduced the ‘Risk Dashboard’,
a risk management tool that helps the
Executive Board identify both risk concentrations
across the Group and potential risk-mitigating
actions. The Risk Dashboard captures risks
across all bank and insurance lines, in terms of
Earnings at Risk and Capital at Risk, and shows
the impact of diversifi cation across the Group.
This is information that allows ING to take
strategic decisions based on comparable risk
measures and so maximise the effi cient
allocation of available capital.
Risk Management creates value
Risk management benefi ts ING
shareholders directly, helping to provide
more effi cient capitalisation, lower costs of
risk and funding, and support for growth.
Together, this results in the ability to
generate more profi t and more economic
profi t. This is achieved by focusing on four
value drivers: growth, funding costs, risk
costs, and capital costs.
In 2007, ING Group continued to increase
both compliance awareness and the
general understanding among employees
of effective compliance management.
The Executive Board continually stresses
how ING’s strategy of sustainable, profi table
growth can only be achieved alongside
effective compliance management.
Partner to the business
Risk Management has evolved signifi cantly
since ING further strengthened the risk
function. This underlines how Risk
Management’s role at ING is not only
that of watchdog, but also of enabler
and partner in generating value for
shareholders. Risk Management now works
actively with the business to identify and
execute business opportunities.
Pre-tax P&L impact directly related to credit and liquidity crisis
in EUR million 3Q 4Q 3Q+4Q
US subprime RMBS –17 –47 –64
Alt-A RMBS 0 0 0
CDOs/CLOs –15 –36 –51
Monolines 0 –66 –66
Investments in SIVs, ABCP 0 –45 –45
Leveraged Finance –29 0 –29
Total –61 –194 –255
Risk management is essential for ING
Group to identify growth opportunities,
lower the cost of funding and support
strategic decisions. The recent turbulence on
the fi nancial markets has only underscored
the need for sound risk management
systems during times of diffi culty.
Throughout, ING has continued its
commitment to the very best practices
in risk management.
Sound compliance
Financial institutions continue to experience
close scrutiny by regulatory authorities,
governmental bodies, shareholders, rating
agencies, customers and others to ensure
they comply with the relevant laws,
regulations, standards and expectations.
ING seeks to meet the standards and
expectations of regulatory authorities and
other interested parties through a number
of initiatives and activities. The capability
and capacity of the Corporate Compliance
function have been increased, including a
staff increase of 55%.
Please read the Corporate Compliance
paragraph on page 22 of our Annual
Report for additional information
on compliance.
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ING Group Annual Review 2007