JP Morgan Chase 2008 Annual Report Download - page 120

Management’s discussion and analysis
118 JPMorgan Chase & Co./ 2008 Annual Report
Risk reporting and analysis
Operational risk management reports provide timely and accurate
information, including information about actual operational loss lev-
els and self-assessment results, to the lines of business and senior
management. The purpose of these reports is to enable management
to maintain operational risk at appropriate levels within each line of
business, to escalate issues and to provide consistent data aggrega-
tion across the Firm’s businesses and support areas.
Audit alignment
Internal Audit utilizes a risk-based program of audit coverage to pro-
vide an independent assessment of the design and effectiveness of
key controls over the Firm’s operations, regulatory compliance and
reporting. This includes reviewing the operational risk framework, the
effectiveness and accuracy of the business self-assessment process
and the loss data collection and reporting activities.
REPUTATION AND FIDUCIARY RISK MANAGEMENT
A firm’s success depends not only on its prudent management of the
liquidity, credit, market and operational risks that are part of its busi-
ness risks, but equally on the maintenance among many constituents
– clients, investors, regulators, as well as the general public – of a
reputation for business practices of the highest quality. Attention to
reputation always has been a key aspect of the Firm’s practices, and
maintenance of the Firm’s reputation is the responsibility of everyone
at the Firm. JPMorgan Chase bolsters this individual responsibility in
many ways, including through the Firm’s Code of Conduct, training,
maintaining adherence to policies and procedures, and oversight
functions that approve transactions. These oversight functions include
a Conflicts Office, which examines wholesale transactions with the
potential to create conflicts of interest for the Firm, and regional rep-
utation risk review committees, which review certain transactions
with clients, especially complex derivatives and structured finance
transactions, that have the potential to affect adversely the Firm’s
reputation. These regional committees, whose members are senior
representatives of businesses and control functions in the region,
focus on the purpose and effect of the transactions from the client’s
point of view, with the goal that these transactions are not used to
mislead investors or others.
Fiduciary risk management
The risk management committees within each line of business
include in their mandate the oversight of the legal, reputational and,
where appropriate, fiduciary risks in their businesses that may pro-
duce significant losses or reputational damage. The Fiduciary Risk
Management function works with the relevant line-of-business risk
committees with the goal of ensuring that businesses providing
investment or risk management products or services that give rise to
fiduciary duties to clients perform at the appropriate standard rela-
tive to their fiduciary relationship with a client. Of particular focus
are the policies and practices that address a business’ responsibilities
to a client, including client suitability determination; disclosure obli-
gations and communications; and performance expectations with
respect to risk management products or services being provided. In
this way, the relevant line-of-business risk committees, together with
the Fiduciary Risk Management function, provide oversight of the
Firm’s efforts to monitor, measure and control the risks that may
arise in the delivery of the products or services to clients that give
rise to such fiduciary duties, as well as those stemming from any of
the Firm’s fiduciary responsibilities to employees under the Firm’s var-
ious employee benefit plans.