Bank of Montreal 2015 Annual Report Download - page 80

MD&A
Risk Governance
Our enterprise-wide risk management framework is founded on a governance approach that includes a robust committee structure and a
comprehensive set of corporate policies and limits, each of which is approved by the Board of Directors or its committees, as well as specific
corporate standards and operating procedures. Our corporate policies outline frameworks and objectives for every significant risk type, in order to
ensure that risks to which the enterprise is exposed are appropriately identified, managed, measured, monitored and reported in accordance with our
risk appetite. Specific policies govern key risks such as credit, market, liquidity and funding, model, and operational risks. This enterprise-wide risk
management framework is governed at all levels through a hierarchy of committees and individual responsibilities as outlined in the diagram below.
Our risk management framework is reviewed on a regular basis by the Risk Review Committee of the Board of Directors in order to provide
guidance for the governance of our risk-taking activities. In each of our operating groups, management monitors governance activities, controls, and
management processes and procedures. Management also oversees their effective implementation within our overall risk management framework.
Individual governance committees establish and monitor further risk management limits, consistent with and subordinate to the Board-approved limits.
Risk Governance Framework
Board of Directors
Risk Management Committee
Operating Groups
Chief Executive Officer
Corporate Support
Areas/Groups
Enterprise Risk and
Portfolio Management Corporate Audit Group
Risk Review
Committee
Balance Sheet
and Capital
Management
Reputation
Risk
Management
Operational
Risk
Management
Model
Risk
Management
First Line of Defence Second Line of Defence Third Line of Defence
Audit and Conduct Review
Committee
Appropriate risk governance frameworks, including our three lines of defence, are in place in all our material businesses and entities:
Board of Directors is responsible for supervising the management of
the business and affairs of BMO. The Board, either directly or through its
committees, is responsible for oversight in the following areas: strategic
planning, defining risk appetite, the identification and management of
risk, capital management, fostering a culture of integrity, internal
controls, succession planning and evaluation of senior management,
communication, public disclosure and corporate governance.
Risk Review Committee of the Board of Directors (RRC) assists
the Board in fulfilling its oversight responsibilities in relation to
BMO’s identification and management of risk, adherence to risk
management corporate policies and procedures, compliance with
risk-related regulatory requirements and the evaluation of the Chief
Risk Officer. Our risk management framework is reviewed on a regular
basis by the RRC in order to provide guidance for the governance of
our risk-taking activities.
Audit and Conduct Review Committee of the Board of Directors
assists the Board in fulfilling its oversight responsibilities for the
integrity of BMO’s financial reporting, the effectiveness of BMO’s
internal controls and the performance of its internal and external
audit functions.
Chief Executive Officer (CEO) is directly accountable to the Board for
all of BMO’s risk-taking activities. The CEO is supported by the Risk
Management Committee and its sub-committees, as well as ERPM.
Chief Risk Officer (CRO) reports directly to the CEO and is head of
ERPM. The CRO is responsible for providing independent review and
oversight of enterprise-wide risks and leadership on risk issues,
developing and maintaining a risk management framework and
fostering a strong risk culture across the enterprise.
Risk Management Committee (RMC) is BMO’s senior risk committee.
RMC reviews and discusses significant risk issues and action plans that
arise in executing the enterprise-wide strategy. RMC provides risk
oversight and governance at the highest levels of management. This
committee is chaired by the CRO and its members include the heads
of our operating groups, CEO and CFO.
RMC Sub-Committees have oversight responsibility for the risk
implications and balance sheet impacts of management strategies,
governance practices, risk measurement, model risk management and
contingency planning. RMC and its sub-committees provide oversight
of the processes whereby the risks assumed across the enterprise are
identified, measured, managed, monitored and reported in accordance
with policy guidelines, and are held within limits and risk tolerances.
Enterprise Risk and Portfolio Management (ERPM) as the risk
management second line of defence, provides comprehensive risk
management oversight. It promotes consistency in risk management
practices and standards across the enterprise. ERPM supports a
disciplined approach to risk-taking in fulfilling its responsibilities for
independent transactional approval and portfolio management, policy
formulation, risk reporting, stress testing, modelling, vetting and risk
education. This approach seeks to meet enterprise objectives and to
ensure that risks assumed are consistent with BMO’s risk appetite.
Operating Groups are responsible for identifying, measuring, managing,
monitoring and reporting risk within their respective lines of business.
They exercise business judgment and seek to ensure that effective
policies, processes and internal controls are in place and that significant
risk issues are reviewed with ERPM. Individual governance committees
and ERPM establish and monitor further risk management limits that are
consistent with and subordinate to the Board-approved limits.
BMO Financial Group 198th Annual Report 2015 91