TD Bank 2007 Annual Report Download - page 64

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis60
Accounting Policies and Methods Used by the Bank
The accounting policies and methods the Bank utilizes deter-
mine how the Bank reports its financial condition and results of
operations, and they may require management to make esti-
mates or rely on assumptions about matters that are inherently
uncertain. Such estimates and assumptions may require revi-
sions, and changes to them may materially adversely affect the
Bank’s results of operations and financial condition.
BANK SPECIFIC FACTORS
New Products and Services to Maintain or
Increase Market Share
The Bank’s ability to maintain or increase its market share
depends, in part, on its ability to adapt products and services
to evolving industry standards. There is increasing pressure on
financial services companies to provide products and services at
lower prices. This can reduce the Bank’s net interest income and
revenues from fee-based products and services. In addition, the
widespread adoption of new technologies could require the
Bank to make substantial expenditures to modify or adapt exist-
ing products and services. The Bank might not be successful in
introducing new products and services, achieving market accep-
tance of its products and services, and/or developing and main-
taining loyal customers.
Acquisitions and Strategic Plans
The Bank regularly explores opportunities to acquire other
financial services companies or parts of their businesses directly
or indirectly through the acquisition strategies of its subsidiar-
ies. The Bank’s or a subsidiary’s ability to successfully complete
an acquisition is often subject to regulatory and shareholder
approvals, as is the case in the pending Commerce acquisition,
and the Bank cannot be certain when or if, or on what terms and
conditions, any required approvals will be granted. Acquisitions
can affect future results depending on management’s success in
integrating the acquired business. If the Bank or its subsidiary
encounters difficulty in integrating the acquired business, main-
taining the appropriate level of governance over the acquired
business or finding appropriate leadership within the acquired
entity, this can prevent the Bank from realizing expected reve-
nue increases, cost savings, increases in market share and other
projected benefits from the acquisition. The Bank’s financial
performance is also influenced by its ability to execute strategic
plans developed by management. If these strategic plans do not
meet with success or there is a change in strategic plans, the
Bank’s earnings could grow more slowly or decline.
Ability to Attract and Retain Key Executives
The Bank’s future performance depends to a large extent on its
ability to attract and retain key executives. There is intense com-
petition for the best people in the financial services sector.
There is no assurance that the Bank will be able to continue to
attract and retain key executives, employed by the Bank or an
entity acquired by the Bank, although this is the goal of the
Bank’s management resource policies and practices.
Business Infrastructure
Third parties provide key components of the Bank’s business
infrastructure such as Internet connections and network access.
Given the high volume of transactions we process on a daily
basis, certain errors may be repeated or compounded before
they are discovered and successfully rectified. Despite the con-
tingency plans we have in place, disruptions in Internet, net-
work access or other voice or data communication services
provided by these third parties could adversely affect the
Bank’s ability to deliver products and services to customers
and otherwise conduct business.
Adequacy of the Bank’s Risk Management Framework
The Bank’s risk management framework is made up of various
processes and strategies to manage its risk exposure. Types
of risk to which the Bank is subject include credit, market
(including equity and commodity), liquidity, interest rate,
operational, reputational, insurance, strategic, foreign
exchange, regulatory, legal and other risks. There can be no
assurance that the Bank’s framework to manage risk, including
such framework’s underlying assumptions and models, will be
effective under all conditions and circumstances. If the Bank’s
risk management framework proves ineffective, whether
because it does not keep pace with changing Bank or market
circumstances or otherwise, the Bank could suffer unexpected
losses and could be materially adversely affected.
EXECUTIVE SUMMARY
Financial services involves prudently taking risks in order to
generate profitable growth. At the Bank, our goal is to earn a
stable and sustainable rate of return for every dollar of risk we
take, while putting significant emphasis on investing in our
businesses to ensure we can meet our future growth objectives.
Our businesses thoroughly examine the various risks to which
they are exposed and assess the impact and likelihood of those
risks. We respond by developing business and risk management
strategies for our various business units taking into consider-
ation the risks and business environment in which we operate.
RISK FACTORS AND MANAGEMENT
Managing Risk
RISKS INVOLVED IN OUR BUSINESSES
Through our businesses and operations, we are exposed to a
broad number of risks that have been identified and defined
in our Enterprise Risk Framework. This framework outlines
appropriate risk oversight processes and the consistent
communication and reporting of key risks that could hinder
the achievement of our business objectives and strategies.