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BMO Financial Group 186th Annual Report 2003 45
Comprehensive Risk Governance
The risk governance structure ensures sound business decisions
are made that balance risk and reward and drive the maximi-
zation of total shareholder return. It also ensures that revenue-
generating activities are consistent with our risk appetite and
standards. Our governance structure for risk-taking is outlined
in the box below.
Our comprehensive risk governance structure includes a body
of corporate policies approved by the Board of Directors. Risk
management policies, standards and procedures are continually
reviewed to ensure that they provide effective and superior gov-
ernance over our risk-taking activities.
Board-approved policies and risk limits define BMO’s risk appe-
tite. Risk limits are reviewed and approved annually by RRC for:
▪
credit and counterparty risk – limits on country, industry, port-
folio products/segments, group and single name exposures;
▪
market risk – limits on Market Value Exposure (MVE), Earnings
Volatility (EV) and stress testing; and
▪
liquidity and funding risk – limits for liquid assets, liability
diversification, credit and liquidity commitments, asset pledg
-
ing and cash flow mismatches.
These risk limits generally encompass both on and off-balance
sheet arrangements.
BMO Financial Group has an enterprise-wide capability to rec-
ognize, understand, measure, assess and manage the risks taken
across the organization. These risks are classified as credit
and counterparty (including insurance), market, liquidity and
funding, operational and business risk due to earnings volatility.
Enterprise-Wide Risk Management
Ronald G. Rogers
Deputy Chair, Enterprise Risk and Portfolio Management, BMO Financial Group
Risk Review Committee of the Board of Directors (RRC)
RRC is responsible for assisting the Board in fulfilling its oversight responsibilities in relation to BMO’s identification and management of risk, adherence to
internal risk management policies and procedures, and compliance with risk-related regulatory requirements.
Chairman and Chief Executive Officer (CEO)
The CEO is directly accountable to the Board for all of BMO’s risk-taking activities. Risk Management Committee and its sub-committees and Enterprise Risk
and Portfolio Management support the CEO.
Risk Management Committee (RMC)
RMC, BMO’s senior risk committee, reviews and discusses significant risk issues and action plans that arise in executing the organization’s strategy. The principal
counterparty risk committee was recently integrated with RMC to provide greater consistency and efficiency. RMC ensures that risk oversight and governance
occur at the highest levels of management.
RMC Sub-committees
RMC sub-committees have oversight responsibility for management strategy, governance, risk measurement and contingency planning. Separate sub-
committees have been established for each type of risk and for a number of legal entities within BMO in order to ensure that the risks incurred across the
organization are identified, measured, monitored and reported in accordance with policy and within delegated limits.
Enterprise Risk and Portfolio Management (ERPM)
ERPM brings together all of the credit adjudication, risk management and auditing functions under the leadership of the Deputy Chair, ERPM. It ensures
consistency of risk management practices and standards, and provides clear accountability for risk oversight and control and the management of transactional
risk throughout the enterprise.
Comprehensive
risk governance
Enterprise-Wide
Risk Management
Effective processes
and models
Qualified risk
professionals
Our risk framework guides our risk-taking activities and ensures
that they are aligned with our clients’ needs and our share-
holders’ expectations. It includes the management of risks on an
integrated basis as well as direct management of each individual
risk type. The framework is built on the following elements:
comprehensive risk governance, effective processes and models
and qualified risk professionals.
Corporate Risk Management provides enterprise-wide policy direction and
oversight and ensures that risk-taking is appropriately governed, identified,
assessed, measured, monitored and reported.
Risk Management Units dedicated to each of BMO’s operating groups
ensure that risk management is applied consistently and effectively at the
transactional level and throughout all levels of the organization.
“
We manage our r isk so that the sustainability of our performance is not in doubt. That
means using the
latest science and the best people so that our shareholders, customers and employees can be confident that
we areusing the best and most consistent approach to managing all our risks.”