AIG 2012 Annual Report Download - page 79

.....................................................................................................................................................................................
Risk Management Highlights
Our Risk Management Process
..............................................................................................................................................................................................
Risk management is an integral part of managing our businesses. It is a key
element of our approach to corporate governance. We have an integrated Risk Management
process for managing risks throughout the organization. The framework of our
Enterprise Risk Management (ERM) system provides senior management with
a consolidated view of our major risk positions. • We remain committed to
adhering to the highest
Our risk management process includes: standards of risk management
•An enhanced risk governance structure that supports consistent and and corporate governance.
transparent decision making. We have recently revised our corporate
• We continue to promote
policies to ensure that accountability for the implementation and oversight of
awareness and accountability
each policy is better aligned with individual corporate executives while
for key risk and business
specialized risk governance committees already in operation receive regular
decisions, and performance
reporting regarding policy compliance.
than in the past.
•Risk committees at our corporate level as well as in each business
unit that manage the development and maintenance of a risk and • We manage risks better by
control culture encompassing all significant risk categories. Our Board applying performance metrics
of Directors oversees the management of risk through the complementary that enable us to assess risk
functioning of the Finance and Risk Management Committee (the FRMC) more clearly and address
and the Audit Committee, as well as through its regular interaction with evolving market conditions.
other committees of the Board.
•A capital and liquidity stress testing framework to assess our aggregate
exposure to our most significant risks. We conduct enterprise-wide stress
tests under a range of scenarios to better understand the resources needed to
support our subsidiaries and consolidated company.
Strategic Outlook
Industry Trends
..............................................................................................................................................................................................
Our business is affected by industry and economic factors such as interest rates, credit and equity market conditions,
regulation, tax policy, competition, and general economic, market and political conditions. In 2012, and continuing into
2013, we operated under difficult market conditions, characterized by factors such as low interest rates, instability in
the global markets due to the European debt crisis, and slow growth in the U.S. economy.
The prevailing interest rate climate has a particularly significant effect on our industry. Investment returns have
declined as the U.S. fixed income market remains in a low interest rate environment. In addition, current market
conditions may not necessarily permit insurance companies to increase pricing across all our product lines.
..................................................................................................................................................................................................................................
AIG 2012 Form 10-K62
ITEM 7 / EXECUTIVE SUMMARY
a
a
g
e
e
i
s
a
n
a
g
e
m
e
n
R
t
R
i
k
M