Bank of Montreal 2008 Annual Report Download - page 19

BMO Financial Group 191st Annual Report 2008 | 15
PROGRESS REPORT
BMO and the global economy
For more than a year, BMO and the other Canadian banks have been
involved in a concerted effort to ensure the orderly functioning of
financial markets in Canada –and, by extension, helping maintain
confidence in global financial markets. This is something we will
continue to do. Based upon performance before the current market
uncertainty and the initiatives taken during the past year, the World
Economic Forum’s most recent Global Competitiveness Report rated
Canada as having the soundest banking system in the world.
It is now widely recognized that the global economy and financial
markets have been affected by the U.S. mortgage market situation,
along with fluctuations in currencies, commodities and equities.
Earlier, it was thought that the economies of rapidly growing
emerging-market nations, including China, India, Brazil and Russia,
might not be notably affected by the weakening U.S. economy.
These nations have accounted for much of the growth in demand
for commodities –which has in turn been an important driver
BMO’s Risk Evolution Initiative is building on our existing strengths. We are systematically investing in our risk management to further
enhance our capabilities:
for Canada’s economy. And indeed, the prices of oil, metals and
agricultural products continued to climb through mid-year.
However, as weak economic conditions spread from North America
to Japan and much of Europe, export-dependent emerging markets
are also experiencing slower rates of growth. This has led to a
sharp downward correction in commodity prices. Given continued
uncertainty as to when financial markets will recover and stronger
global economic performance will return, most markets now
face a period of substantial volatility.
At BMO, we are actively managing our businesses to navigate
through this environment as it continues to change. This is a time
for prudent and consistent management. Our stability, our record
of standing behind our customers, the quality of our advice and our
financial strength –these are what matter most to our customers
right now.
BMO’S RISK EVOLUTION INITIATIVE
1. Building ownership
and accountability
• Lines of business, risk management groups and control functions work closely together,
with clearly defined structures and accountabilities
• Businesses represent the first line of defence in risk management, the Risk Management Group
the second line and Internal Audit the third
• We are instilling a strong sense of ownership and accountability for risk
2. Building risk transparency • Bottom-up process ensures we identify, monitor and manage key risks
• Enhanced top-down view focuses on significant top-line risks and emerging risks
• Improved risk reporting provides greater transparency and facilitates more effective risk discussions
3. Optimizing risk-return • Performance of business units is assessed according to risk-adjusted returns
• Exiting activities that do not have attractive risk-return profiles to address opportunities
that will optimize risk-return
4. Building partnerships • Partner with each business to enhance risk transparency and risk-return performance
• Encourage open and effective dialogue about risk across the enterprise