Bank of Montreal 2007 Annual Report Download - page 77

MD&A
BMO Financial Group 190th Annual Report 2007 73
Reputation Risk
BMO’s reputation is one of its most valuable assets. Key to effectively
building and maintaining BMO’s reputation is fostering a business
culture that:
•incorporates integrity and ethical conduct as core values; and
•promotes a conviction that every business decision must reflect the
enterprise’s core ethical values.
The potential for damage to our corporate reputation exists in every busi-
ness decision. Therefore, we believe that active, ongoing and effective
management of reputation risk is best conducted through integration of
explicit assessments of reputation risk into strategy development, oper-
ational implementation and transactional decision-making. Reputation
risk is also managed through our corporate governance practices, code
of conduct and risk management framework. It is the responsibility of
all employees to conduct themselves in accordance with FirstPrinciples,
BMO’s code of conduct, and thus build and maintain BMO’s reputation.
The Reputation Risk Management Committee considers potential
reputation risks to the enterprise, specifically reviewing complex credit
and structured financings as required.
Reputation risk is the risk of negative impacts resulting from the
deterioration of BMO’s reputation with key stakeholders. These
impacts include revenue loss, reductions in our customer or client
base and declines in BMO’s share price.
Environmental Risk
At BMO, we are very conscious of the emerging issues and risks associ-
ated with the environment and in particular, climate change. In 2007,
we commissioned a benchmarking study in order to assess how best to
address the issues relating to climate change. As a result, we have
identified best practices of other financial institutions and are using
these insights to enhance our own practices.
We are addressing climate change through a series of internal
operating initiatives designed to reduce our impact on the environment.
The key areas of focus for reduction are energy, paper products usage,
and business travel.
Within our credit risk management policies and processes, we have
a strong foundation for identifying, reviewing and managing environ-
mental, social and governance issues related to lending transactions.
We consistently apply the Equator Principles for managing social and
environmental issues in project finance and continue to assess the
appropriateness of our lending practices with respect to changes in
environmental public policy issues and legislation.
BMO remains committed to the principles of sustainable
development and, in particular, to the belief that the quality of our
lives improves when economic growth is integrated with respect for
the environment.
Environmental risk is the risk of loss or damage to BMO’s reputa-
tion resulting from environmental concerns related to BMO or its
customers. Environmental risk is often associated with credit and
operational risk.