ING Direct 2011 Annual Report Download - page 215

Deputy
Chief Risk Officer
Eurasia
Chief Risk Officer
ING Bank
Chief Risk Officer
US
Chief Risk Officer
ING Group
ING GROUP RISK MANAGEMENT
Taking measured risks is part of ING Group’s business. As a financial services company active in banking, investments, life and non-life
insurance and retirement services, ING Group is naturally exposed to a variety of risks.
To ensure measured risk-taking throughout the organisation, ING Group operates through a comprehensive risk management framework,
integrated risk management in its daily business activities and strategic planning. This ensures the identification, measurement and control
of risks at all levels of the organisation so that ING Group’s financial strength is safeguarded.
Risk Management assists the various management boards with the formulation of risk appetite, strategies, policies and limits and provides
a review, oversight and support function throughout ING Group on risk-related issues. The main financial risks ING Group is exposed to are
credit risk (including transfer risk), market risk (including interest rate, equity, real estate, implied volatility, and foreign exchange risks),
insurance risk, liquidity risk and business risk. In addition, ING Group is exposed to non-financial risks, e.g. operational and compliance risks.
The way ING Group manages these risks on a day-to-day basis is described in this risk management section.
As a result of the decision to manage ING Bank and ING Insurance separately, ING has implemented two distinct risk appetite frameworks for
both Bank and Insurance. The common concept however is that risk appetite is expressed as the tolerance to allow key capital ratios to deviate
from their target levels under adverse scenarios. These frameworks are discussed in more detail in the specific sections of this risk
management section.
ING has completed the divestment of its Latin American pensions, life insurance and investment management operations. This transaction
is the first major step in the divestment of ING’s insurance and investment management activities.
Both ING Bank and ING Insurance need to prepare for significant changes in the regulatory requirements. For ING Bank the most important
one is the implementation of Basel III, while ING Insurance runs an extensive program to allow the implementation of Solvency II (which is the
fundamental reform of European insurance solvency and risk governance legislation; announced to be effective as of 1 January 2013 but
delays in legislation imply that it will not be effective before 1 January 2014). Additionally, both in Bank and Insurance, ING continued its stress
testing efforts, with stress testing becoming more important and more embedded in the risk culture.
MISSION AND OBJECTIVES
The mission of ING Group’s risk management function is to build a sustainable competitive advantage by fully integrating risk management
into daily business activities and strategic planning. This mission is fully embedded in ING Group’s business processes. The following principles
support this objective:
• Products and portfolios are structured, underwritten, priced, approved and managed appropriately and compliance with internal and
external rules and guidelines is monitored;
• ING’s risk profile is transparent, managed to avoid surprises, and is consistent with delegated authorities;
• Delegated authorities are consistent with the overall Group strategy and risk appetite; and
• Transparent communication to internal and external stakeholders on risk management.
Risk Management benefits ING and its shareholders directly by providing more efficient capitalisation and lower costs of risk and funding. The
cost of capital is reduced by working closely with rating agencies and regulators to align capital requirements to risks. Risk Management helps
business units to lower funding costs, make use of the latest risk management tools and skills, and lower strategic risk, allowing them to focus
on their core expertise with the goal of making ING’s businesses more competitive in their markets.
GROUP RISK MANAGEMENT FUNCTION
The ING Group CRO is supported by the Risk functions of ING Group and by the Group functions Corporate Legal and the Functional
Controller Insurance. As a result of the decision to manage ING Bank and ING Insurance separately, ING Group Chief Risk Office has
delegated day-to-day Risk Management within ING Bank, ING Insurance Eurasia and ING Insurance US to the respective (deputy) CROs.
The Risk functions of ING Group have been delegated to the CRO of ING Bank.
Further details on the Risk Governance and Risk Profile in the three entities, is given in the following sections.
ING Group uses an integrated risk management approach for both its banking activities and for its Insurance activities. With the
operational separation of ING Bank and ING Insurance, the focus of ING’s risk management practices is now located in the bank and
insurance companies. The remainder of this risk paragraph discusses these practices for ING Group, ING Bank, ING Insurance Eurasia and
ING Insurance US respectively.
Risk measures related to accounting are based on IFRS-EU where relevant, as IFRS-EU is the primary accounting basis, which is also the
basis for statutory and regulatory reporting and risk management.
Risk management amounts in millions of euros, unless stated otherwise
Risk management in 2011
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
213ING Group Annual Report 2011