AIG 2012 Annual Report Download - page 173

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Transaction Approval and Business Practices Committee (TABPC): TABPC provides the primary corporate-
level review function for all proposed transactions and business practices that are significant in size, complex in
scope, or that present heightened legal, reputational, accounting or regulatory risks. Our EVP and Treasurer serves
as TABPC Chair and additional members include our EVP and General Counsel, EVP and CRO, EVP and CFO,
EVP – Investments, and a senior executive from Finance.
Operational Risk Committee (ORC): This Committee is tasked with overview of the enterprise-wide identification,
escalation and mitigation of risks that may arise from inadequate or failed internal processes, people, systems, or
external events. The Committee approves AIG’s Operational Risk Management (ORM) framework and related
policies, which includes the risk and control self assessment (RCSA), Risk Events, Key Risk Indicators (KRIs) and
Scenario Analysis. The Committee monitors the adequacy of ORM staffing and ensures applicable governance
structures are established to provide oversight of operational risk at each Business Unit and Corporate Function. The
ORC also reviews aggregate firm-wide operational risk reports. Our Chief Administrative Officer is Chair of the ORC
and our Head of Operational Risk Management serves as ORC Secretary. Other ORC members include senior AIG
executives with expertise in legal, compliance, technology, finance and operational risk, as well as business
continuity management and the chief risk officers of our business units.
Group Risk Committee (GRC)
Chair: EVP and AIG Chief Risk
Officer
Financial Risk Group (FRG)
Chair: EVP and AIG Chief Risk
Officer
Transaction Approval &
Business Practices Committee
(TABPC)
Chair: EVP and Treasurer
Operational Risk Committee
(ORC)
Chair: EVP and Chief
Administrative Officer
Business Unit Risk & Capital
Committees (BU RCCs)
(AIG PC, AIG L&R, UGC)
Business Unit Risk Committees: Each of our major insurance businesses has established a risk and capital
committee (BU RCC) that serves as the senior management committee responsible for risk oversight at the individual
business unit level. The BU RCCs are responsible for the identification, assessment and monitoring of all sources of
risk within their respective portfolios. Specific responsibilities include setting risk tolerances, approving capital
management strategies (including asset allocation and risk financing), insurance portfolio optimization, risk
management policies and providing oversight of economic capital models. In addition to its BU RCC, each major
insurance business has established subordinate committees which identify, assess and monitor the specific
operational, transactional and financial risks inherent in its respective business. Together, the BU Risk Committees
and AIG Risk Committees described above provide comprehensive risk oversight throughout the organization.
Risk oversight activities also continue to be coordinated with discontinued operations, such as ILFC, until pending
sale transactions are closed.
Risk Appetite, Identification, and Measurement
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ERM has developed a company-wide Risk Appetite Statement (RAS), which will be updated on at least an annual
basis. By formally defining our risk appetite, we seek to integrate stakeholder interests, business goals and available
financial resources through taking measured risks that are intended to generate repeatable, sustainable earnings and
produce long-term value and stability.
The RAS articulates our risk-taking capacity by setting consolidated capital and liquidity tolerances as observed
under expected and stressed business and economic conditions. RAS also reflects constraints on minimum capital
positions for our insurance operations. These constraints inform the requirements for capital adequacy for individual
businesses, based on capital assessments under rating agency, regulatory and other business needs. Consistent
with our risk appetite, we have established risk tolerances that are reflected in our business planning and are
integrated into the management of our operations. Risk tolerances cover insurance company capital ratios as well as
metrics associated with AIG Parent resources, including consolidated company capital ratios and parent liquidity. Our
GRC routinely reviews the level of risk taken by the consolidated organization in relation to established risk
tolerances. A consolidated risk report is also presented to the FRMC by our CRO.
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AIG 2012 Form 10-K156
ITEM 7 / ENTERPRISE RISK MANAGEMENT