Wells Fargo 2015 Annual Report Download - page 60

Risk Management
Wells Fargo manages a variety of risks that can significantly
affect our financial performance and our ability to meet the
expectations of our customers, stockholders, regulators and
other stakeholders. Among the risks that we manage are
operational risk, credit risk, and asset/liability management
risk, which includes interest rate risk, market risk, and liquidity
and funding risks. Our risk culture is strongly rooted in our
Vision and Values, and in order to succeed in our mission of
satisfying our customers’ financial needs and helping them
succeed financially, our business practices and operating model
must support prudent risk management practices.
Risk Culture
Wells Fargo's risk culture is designed to promote
understanding of our risk profile, transparency of risks across
the Company, effective transfer of information (including the
escalation of important risk issues), and more informed
decision-making. Our risk culture also seeks to foster an
environment that encourages and promotes robust
communication and cooperation among the Company’s three
lines of defense – (1) Wells Fargo’s lines of business and certain
other corporate functions, (2) Corporate Risk, our Company’s
primary second-line of defense led by our Chief Risk Officer
who reports to the Board’s Risk Committee, and (3)
Wells Fargo Audit Services, our internal audit function which is
led by our Chief Auditor who reports to the Board’s Audit and
Examination Committee (A&E Committee). Our risk culture
begins with our Vision and Values and is demonstrated by
setting the appropriate tone at the top, fostering credible
challenge within and among each of our lines of defense, and
developing and maintaining sound incentive compensation risk
management practices.
• Our Vision and Values outlines our vision and our
Company’s six priorities, including putting customers first
and managing risk. Our focus is on earning our customers’
trust, establishing and maintaining deep and enduring
customer relationships, and providing exceptional
Wells Fargo customer experiences, which also means that
we must proactively protect our customers’ financial
security through a risk-focused culture.
• A strong risk culture starts with the tone at the top,
which is set by the Company’s Board of Directors, CEO,
Operating Committee (which consists of our Chief Risk
Officer and other senior executives) and other members of
senior management, and emphasizes a prudent approach
to taking and managing risk. In addition, our business and
risk leaders work with Wells Fargo’s lines of business and
other corporate functions to understand the risks inherent
in our businesses and to consider those risks when making
business and strategic planning decisions.
• We believe a key component of an effective risk
management function is the degree to which all team
members are accountable for risk management and have
the ability to provide credible challenge to business and
risk management decisions, such as communicating an
alternative view, opinion, or strategy, or offering ideas or
alternative approaches that may be equally or more
effective in mitigating risk.
• Wells Fargo’s incentive-based compensation
practices are designed to balance risk and financial
reward in a manner that does not provide team members
with an incentive to take inappropriate risk or act in a way
that is not in the best interest of customers.
Our risk culture is further supported by our Code of Ethics
and Business Conduct. We require all team members to adhere
to the highest standards of ethics and business conduct and
comply with all applicable laws and regulations.
Risk Framework
The Company’s primary risk management objectives are: (a) to
support the Board as it carries out its risk oversight
responsibilities; (b) to support members of senior management
in achieving the Company's strategic objectives and priorities
by maintaining and enhancing our risk framework; and (c) to
maintain and continually promote Wells Fargo’s strong risk
culture, which emphasizes each team member’s accountability
for appropriate risk management. Key elements of our risk
program include:
• Cultivating a strong risk culture, which emphasizes
each team member’s accountability for appropriate risk
management and the Company’s bias for conservatism
through which we strive to maintain a conservative
financial position measured by satisfactory asset quality,
capital levels, funding sources, and diversity of revenues.
• Defining and communicating across the Company an
enterprise-wide statement of risk appetite which
serves to guide business and risk leaders as they manage
risk on a daily basis. The enterprise-wide statement of risk
appetite describes the nature and magnitude of risk that
Wells Fargo is willing to assume in pursuit of its strategic
and business objectives.
• Maintaining a risk management governance
structure, including escalation protocols and a
management-level committee structure, that enables the
comprehensive oversight of the Company’s risk program
and the effective and efficient escalation of risk issues to
the appropriate level of the Company for information and
decision-making.
• Designing risk frameworks, policies, standards,
procedures, controls, processes, and practices that
are effective and aligned, and facilitate the active and
timely management of current and emerging risks across
the Company.
• Structuring an effective and independent Corporate
Risk function whose primary responsibilities include:
(a) establishing and maintaining an effective risk
framework, (b) maintaining a comprehensive perspective
on the Company’s current and emerging risks, (c) credibly
challenging the intended business and risk management
actions of Wells Fargo’s first-line of defense, and (d)
reviewing risk management programs and practices across
the Company to confirm appropriate coordination and
consistency in the application of effective risk
management approaches.
• Maintaining an independent internal audit function
that is primarily responsible for adopting a systematic,
disciplined approach to evaluating the effectiveness of risk
management, control and governance processes and
activities as well as evaluating risk framework adherence
to relevant regulatory guidelines and appropriateness for
Wells Fargo’s size and risk profile.
Wells Fargo & Company
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