KeyBank 2014 Annual Report Download - page 88

variable (including the occurrence or nonoccurrence of a specified event). These variables, known as
underlyings, may be related to an asset or liability, or another entity’s failure to perform under a contract.
Additional information regarding these types of arrangements is presented in Note 20 under the heading
“Guarantees.”
Risk Management
Overview
Like all financial services companies, we engage in business activities and assume the related risks. The most
significant risks we face are credit, compliance, operational, capital and liquidity, market, reputation, strategic,
and model risks. Our risk management activities are focused on ensuring we properly identify, measure, and
manage such risks across the entire enterprise to maintain safety and soundness and maximize profitability.
Certain of these risks are defined and discussed in greater detail in the remainder of this section.
The KeyCorp Board of Directors (the “Board”) serves in an oversight capacity ensuring that Key’s risks are
managed in a manner that is effective and balanced and adds value for the shareholders. The Board understands
Key’s risk philosophy, approves the risk appetite, inquires about risk practices, reviews the portfolio of risks,
compares the actual risks to the risk appetite, and is apprised of significant risks, both actual and emerging, and
determines whether management is responding appropriately. The Board challenges management and ensures
accountability.
The Board’s Audit Committee assists the Board in oversight of financial statement integrity, regulatory and legal
requirements, independent auditors’ qualifications and independence, and the performance of the internal audit
function and independent auditors. The Audit Committee meets with management and approves significant
policies relating to the risk areas overseen by the Audit Committee. The Audit Committee has responsibility over
all risk review functions, including internal audit, financial reporting, legal matters, and fraud risk. The Audit
Committee also receives reports on enterprise risk. In addition to regularly scheduled bi-monthly meetings, the
Audit Committee convenes to discuss the content of our financial disclosures and quarterly earnings releases.
The Board’s Risk Committee assists the Board in oversight of strategies, policies, procedures, and practices
relating to the assessment and management of enterprise-wide risk, including credit, market, liquidity, model,
operational, compliance, reputation, and strategic risks. The Risk Committee also assists the Board in overseeing
risks related to capital adequacy, capital planning, and capital actions. The Risk Committee reviews and provides
oversight of management’s activities related to the enterprise-wide risk management framework, which includes
review of the Enterprise Risk Management (ERM) Policy, including the Risk Appetite Statement, and
management and ERM reports, and approval of any material changes to the charter of the ERM Committee and
significant policies relating to risk management.
The Audit and Risk Committees meet jointly, as appropriate, to discuss matters that relate to each committee’s
responsibilities. Committee chairpersons routinely meet with management during interim months to plan agendas
for upcoming meetings and to discuss emerging trends and events that have transpired since the preceding
meeting. All members of the Board receive formal reports designed to keep them abreast of significant
developments during the interim months.
Our ERM Committee, chaired by the Chief Executive Officer and comprising other senior level executives, is
responsible for managing risk and ensuring that the corporate risk profile is managed in a manner consistent with
our risk appetite. The ERM Program encompasses our risk philosophy, policy, framework, and governance
structure for the management of risks across the entire company. The ERM Committee reports to the Board’s
Risk Committee. Annually, the Board reviews and approves the ERM Policy, as well as the risk appetite,
including corporate risk tolerances for major risk categories. We use a risk-adjusted capital framework to manage
risks. This framework is approved and managed by the ERM Committee.
75