PNC Bank 2013 Annual Report Download - page 89

R ISK M ANAGEMENT
E NTERPRISE R ISK M ANAGEMENT
PNC encounters risk as part of the normal course of operating
our business. Accordingly, we design risk management
processes to help manage this risk. This Risk Management
section describes our risk framework, including risk appetite
and strategy, culture, governance, risk identification, controls
and reporting. It also provides an analysis of our key areas of
risk, which include but are not limited to credit, operational,
market, liquidity and model. Our use of financial derivatives
as part of our overall asset and liability risk management
process is also addressed within the Risk Management section.
PNC operates within a rapidly evolving regulatory
environment. Accordingly, we are actively focused on the
timely adoption of regulatory pronouncements within our
Enterprise Risk Management (ERM) Framework.
We view Risk Management as a cohesive combination of the
following risk elements which form PNC’s ERM Framework:
Risk Organization
& Governance
Risk
Monitor-
ing &
Reporting
Risk
Identi-
fication &
Quanti-
fication
Risk Controls
& Limits
Risk Appetite
Statement
Risk Capacity
Appetite &
Strategy
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R ISK A PPETITE AND S TRATEGY
PNC dynamically manages its risk appetite to optimize long
term shareholder value while supporting our employees,
customers, and communities. PNC’s risk appetite represents
the organization’s desired enterprise risk position, set within
our risk capacity to achieve our strategic objectives and
business plans. Reviewed periodically through the risk
reporting and Strategic Planning processes, the risk appetite
serves as an operating guide for making balanced risk
decisions that support our business strategies; it will adjust
over time to reflect the current and anticipated economic
environment, growth objectives, risk capacity and our risk
profile.
We set individual risk appetite descriptions for each of the
risks within our taxonomy to support the components of the
Risk Appetite Statement. The risk appetite descriptions are
qualitative and quantitative statements that reflect risk limits
as defined in policy and managed through the ERM
framework.
R ISK C ULTURE
All employees are considered risk managers, and are
responsible for understanding PNC’s Risk Appetite Statement
and ERM framework and how they apply to their respective
roles. They are encouraged to collaborate across groups to
identify and mitigate risks and elevate issues as required. PNC
reinforces risk management responsibilities through a
performance management system where employee
performance goals include risk management objectives.
Incentives for relevant employees incorporate risk
management results through balanced measures of risk-
adjusted performance.
Proactive communication, between groups and up to the
Board of Directors, facilitates timely identification and
resolution of risk issues. PNC’s multi-level risk committee
structure provides a formal channel to identify, decision, and
report risk. Risk committee membership includes
representatives from business and risk stakeholder groups that
are responsible for helping ensure risk issues are proactively
identified, decisioned, monitored, communicated and
managed appropriately within the enterprise risk management
framework.
All PNC employees are responsible for risk management and
PNC’s governance structure establishes clear roles and
responsibilities for risk management throughout the
organization.
R ISK O RGANIZATION AND G OVERNANCE
PNC employs a comprehensive Risk Management governance
structure to help ensure that risks are identified, balanced
decisions are made that consider risk and return, and risks are
adequately monitored and managed. Risk committees
established within this governance structure provide oversight
for risk management activities at the Board, corporate, and
business levels. Committee composition is designed to
provide effective oversight, with the risk organization having
sufficient authority to influence material decisions. The Board
oversees enterprise risk management of PNC for any material
changes to the risk profile and periodically reviews core
elements of enterprise risk including the Risk Appetite
Statement and Risk Capacity, Appetite and Strategy.
We use our governance structure to assess the effectiveness of
our Risk Management practices on an ongoing basis, based on
how we manage our day-to-day business activities and on our
development and execution of more specific strategies to
mitigate risks. Specific responsibilities include:
Board of Directors – The Board oversees enterprise risk
management. The Risk Committee of the Board of
The PNC Financial Services Group, Inc. – Form 10-K 71