Sallie Mae 2010 Annual Report Download - page 89

portfolio and economic analysis. This infrastructure is overseen by our Chief Credit Officer and the executive
management committee that he chairs.
Credit and counterparty risk related to derivative contracts is managed by reviewing counterparties for
credit strength on an ongoing basis and via our credit policies, which place limits on the amount of exposure
we may take with any one counterparty and, in most cases, require collateral to secure the position. The credit
and counterparty risk associated with derivatives is measured based on the replacement cost should the
counterparties with contracts in a gain position to the Company fail to perform under the terms of the contract.
The credit and counterparty risk in our investment portfolio is minimized by only investing in paper with
highly rated issuers and setting limits on our exposure per issuer. Credit and counterparty risk related to
derivative contracts and our investment portfolio are approved and managed by our Credit Risk Management
group overseen by our Chief Credit Officer.
Significant credit and counterparty risks related to derivative contracts or our investment portfolio are
reported to the Finance Committee of the Board of Directors. Additionally, our Chief Credit Officer reports,
on a regular basis, to the Board and the Audit Committee of the Board regarding the asset quality of our
Private Education Loans.
Regulatory and Compliance Risk Management
Regulatory and compliance risk is the risk to earnings or capital arising from violations of laws, rules, or
regulations. The Company is exposed to regulatory and compliance risk when key areas such as our private
education lending, collections or government loan servicing businesses are not properly monitored for
compliance with legal and regulatory requirements and when an oversight program does not include
appropriate audit and control features. We also face regulatory and compliance risk when new, expanded or
modified products or services are not properly monitored for compliance with legal and regulatory
requirements.
Primary ownership and responsibility for regulatory and compliance risk is placed with the business areas
to manage their specific regulatory and compliance risks. Our Compliance Department supports these activities
through providing extensive training and monitoring of our Code of Business Conduct, maintaining consumer
lending regulatory and information security policies and procedures, and working in close coordination with
our other centralized support functions such as our Legal department. Compliance risks associated with new
products and services, SEC disclosure obligations, security and confidentiality of information and effectiveness
of our technology infrastructure, internal controls and compliance with internal control standards, dissemina-
tion of changes in regulations affecting the business, and enforcement of credit lending policies and practices
are each the subject of specific review by existing management committees.
The Audit Committee of our Board of Directors has oversight with respect to establishing standards with
respect to our monitoring and control of regulatory and compliance risks and the qualification of employees
overseeing these risk management functions. The Audit Committee receives periodic reports from executive
management team members responsible for the regulatory and compliance risk management functions.
88