Sallie Mae 2011 Annual Report Download - page 90

rates. Our primary liquidity objective is to ensure our ongoing ability to meet our funding needs for our
businesses throughout market cycles, including during periods of financial stress. Our two primary liquidity risks
involve our ongoing ability to originate Private Education Loans and retire indebtedness as it matures. Key
objectives associated with our funding liquidity needs relate to our ability to access the capital markets at
reasonable rates and to continue to maintain retail deposits and funding sources through the Bank.
Our funding and liquidity risk management activities are centralized within our Corporate Finance
department, which is responsible for planning and executing our funding activities and strategies. We analyze
and monitor our liquidity risk, maintain excess liquidity and access diverse funding sources depending on current
market conditions. Funding and liquidity risks are overseen and recommendations approved primarily through
our internal Asset and Liability Committee. The Finance and Operations Committee of the Board of Directors is
responsible for periodically reviewing and approving our funding and liquidity positions and contingency
funding plan. Our Board of Directors also receives regular reports on our performance against funding and
liquidity plans at each meeting.
Operational Risk Management
Operational risk arises from the potential that inadequate information systems, operational problems,
breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses. The cornerstone
of our annual operational risk management program involves our Board of Directors’ approval of our annual
strategic business plan and management’s recommendations for how to grow our business while focused on
managing risks to acceptable parameters.
Our Board of Directors receives operations reports (which includes operating metrics and performance
against annual plan) from our Chief Executive and Chief Operating Officers at each regularly scheduled meeting.
Additionally, the Finance & Operations Committee receives business development updates regarding our various
business initiatives that provide information and metrics about each key component of business operations. The
Audit Committee of the Board of Directors receives periodic information security updates and reviews
operational and systems-related matters to insure their implementation produce no significant internal control
issues.
Operational risk exposures are managed through a combination of business line management and enterprise-
wide oversight. Our Chief Operating Officer (“COO”) is responsible for all of our business operations (credit,
servicing, collections, and technology). Management committees, comprised of senior managers and subject
matter experts, focus on particular aspects of operational risk. Enterprise-wide oversight is conducted by a
number of our internal risk management committees listed above. Most comprehensively, the Customer Products
and Services Assessment Committee confirms that in connection with new, expanded, or modified products or
services it recommends for approval that all significant risks are properly identified; adequate controls are in
place to monitor risks to established, prudent limits; and monitoring of risk management activities, exposures,
and issues are performed.
Market Risk Management
Market risk is the risk to our financial condition resulting from adverse movements in market rates or prices,
such as interest rates, foreign exchange rates, credit spreads or equity prices. We are exposed to various types of
market risk, in particular interest rate risk and other risks that arise through the management of our investment
portfolio. Market risk exposures are managed through our internal Asset and Liability Committee. The
responsibilities of this committee include: maintaining oversight and responsibility for all risks associated with
managing our assets and liabilities, and recommending limits to be included in our risk appetite and investment
structure. These activities are closely tied to those related to the management of our funding and liquidity risks.
Consequently, the Finance and Operations Committee of the Board of Directors is also responsible for
periodically reviewing and approving our investment and asset and liability management policies and
contingency funding plan. The Finance and Operations Committee as well as our Chief Financial Officer report
to the full Board of Directors on matters of market risk management.
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