JP Morgan Chase 2014 Annual Report Download - page 110

Management’s discussion and analysis
108 JPMorgan Chase & Co./2014 Annual Report
The Audit Committee has primary responsibility for assisting
the Board in its oversight of the system of controls designed
to reasonably assure the quality and integrity of the Firm’s
financial statements and that are relied upon to provide
reasonable assurance of the Firm’s management of
operational risk. The Audit Committee also assists the Board
in its oversight of legal and compliance risk. Internal Audit,
an independent function within the Firm that provides
independent and objective assessments of the control
environment, reports directly to the Audit Committee and
administratively to the CEO. Internal Audit conducts
independent reviews to evaluate the Firm’s internal control
structure and compliance with applicable regulatory
requirements and is responsible for providing the Audit
Committee, senior management and regulators with an
independent assessment of the Firm’s ability to manage and
control risk.
The Compensation & Management Development Committee
assists the Board in its oversight of the Firm’s compensation
programs and reviews and approves the Firm’s overall
compensation philosophy and practices. The Committee
reviews the Firm’s compensation practices as they relate to
risk and risk management in light of the Firm’s objectives,
including its safety and soundness and the avoidance of
practices that encourage excessive risk taking. The
Committee reviews and approves the terms of
compensation award programs, including recovery
provisions, vesting periods, and restrictive covenants, taking
into account regulatory requirements. The Committee also
reviews and approves the Firm’s overall incentive
compensation pools and reviews those of each of the Firm’s
lines of business and the Corporate segment. The
Committee reviews the goals relevant to compensation for
the Firm’s Operating Committee, reviews Operating
Committee members’ performance against such goals, and
approves their compensation awards. The Committee
recommends to the full Board’s independent directors, for
ratification, the CEO’s compensation. In addition, the
Committee periodically reviews the Firm’s management
development and succession planning, as well as the Firm’s
diversity programs.
Among the Firm’s senior management level committees that
are primarily responsible for key risk-related functions are:
The Firmwide Risk Committee (“FRC”) is the Firm’s highest
management-level Risk Committee. It provides oversight of
the risks inherent in the Firm’s businesses, including credit
risk, market risk, liquidity risk, model risk, structural
interest rate risk, principal risk and country risk. It also
provides oversight of the governance frameworks for
operational, fiduciary and reputational risks. The Committee
is co-chaired by the Firm’s CEO and CRO. Members of the
committee include the Firm’s COO, the Firm’s CFO, LOB
CEOs, LOB CROs, General Counsel, and other senior
managers from risk and control functions. This committee
serves as an escalation point for risk topics and issues
raised by its members, the Line of Business Risk
Committees, Firmwide Control Committee, Firmwide
Fiduciary Risk Committee, Reputation Risk committees and
regional Risk Committees. The committee escalates
significant issues to the Board of Directors, as appropriate.
The Firmwide Control Committee (“FCC”) is a forum to review
and discuss firmwide operational risk, metrics and
management, including existing and emerging issues, and
execution against the operational risk management
framework. The committee is co-chaired by the Firm’s Chief
Control Officer and the head of Firmwide Operational Risk
Governance/Model Risk and Development. It serves as an
escalation point for the line of business, function and
regional Control Committees and escalates significant issues
to the Firmwide Risk Committee, as appropriate.
The Firmwide Fiduciary Risk Committee (“FFRC”) is a forum
for risk matters related to the Firm’s fiduciary activities and
oversees the firmwide fiduciary risk governance framework,
which supports the consistent identification and escalation
of fiduciary risk matters by the relevant lines of business or
corporate functions responsible for managing fiduciary
activities. The committee escalates significant issues to the
Firmwide Risk Committee and any other committee
considered appropriate.
The Firmwide Reputation Risk Governance group seeks to
promote consistent management of reputational risk across
the Firm. Its objectives are to increase visibility of
reputation risk governance; promote and maintain a
globally consistent governance model for reputation risk
across lines of business; promote early self-identification of
potential reputation risks to the Firm; and provide thought
leadership on cross-line of business reputation risk issues.
Each line of business has a separate reputation risk
governance structure which includes, in most cases, one or
more dedicated reputation risk committees.
Line of business, corporate function, and regional risk and
control committees:
Risk committees oversee the inherent risks in the respective
line of business, function or region, including the review,
assessment and decision making relating to specific risks,
risk strategy, policy and controls. These committees
escalate issues to the Firmwide Risk Committee, as
appropriate.
Control committees oversee the operational risks and
control environment of the respective line of business,
function or region. These committees escalate operational
risk issues to their respective line of business, function or
regional Risk committee and also escalate significant risk
issues (and/or risk issues with potential firmwide impact) to
the Firmwide Control Committee.
The Asset-Liability Committee (“ALCO”), chaired by the
Corporate Treasurer under the direction of the COO,
monitors the Firm’s overall balance sheet, liquidity risk and
interest rate risk. ALCO is responsible for reviewing and
approving the Firm’s funds transfer pricing policy (through
which lines of business “transfer” interest rate and foreign
exchange risk to Treasury). ALCO is responsible for
reviewing the Firm’s Liquidity Risk Management and