Goldman Sachs 2009 Annual Report Download - page 69

Due to the uncertainty of the timing and amounts that will
ultimately be paid, our liability for unrecognized tax bene ts
has been excluded from the above contractual obligations table.
See Note8 to the consolidated  nancial statements for information
regarding our commitments, contingencies and guarantees.
Risk Management
Management believes that effective risk management is of primary
importance to the success of Goldman Sachs. Accordingly, we
have a comprehensive risk management process to monitor,
evaluate and manage the principal risks we assume in conducting
our activities. These risks include market, credit, liquidity,
operational, legal, regulatory and reputational exposures.
Risk Management Structure
We seek to monitor and control our risk exposure through
a variety of separate but complementary  nancial, credit,
operational, compliance and legal reporting systems. In addition,
a number of committees are responsible for monitoring risk
exposures and for general oversight of our risk management
process, as described further below. These committees (including
their subcommittees), meet regularly and consist of senior
members of both our revenue-producing units and departments
that are independent of our revenue-producing units.
Segregation of duties and management oversight are
fundamental elements of our risk management process. In
addition to the committees described below, functions that
are independent of the revenue-producing units, such as
Compliance, Finance, Legal, Management Controls (Internal
Audit) and Operations,perform risk management functions,
which include monitoring, analyzing and evaluating risk.
Management Committee. The Management Committee
oversees the global activities of the  rm, including all  rm
risk control functions. The Committee provides this oversight
directly and through authority delegated to the committees it
has established.
Risk Committees. The Firmwide Risk Committee is globally
responsible for the ongoing monitoring and control of
 nancial risks associated with the activities of the  rm.
Through both direct and delegated authority, the Committee
approves  rmwide, product, divisional and business unit limits
for both market and credit risks, approves sovereign credit
risk limits and credit risk limits by ratings groups, and reviews
stress test and scenario analyses results. The Committee also
approves new businesses and products.
The Securities Division Risk Committee sets market risk
limits for our trading activities, subject to overall  rmwide
risk limits, for the FICC and Equities businesses based on a
number of risk measures, including VaR, stress tests, scenario
analyses, and inventory levels.
Business unit risk limits are established by the appropriate risk
committee and may be further allocated by the business unit
managers to individual trading desks. Trading desk managers
have the  rst line of responsibility for managing risk within
prescribed limits. These managers have in-depth knowledge of
the primary sources of risk in their respective markets and the
instruments available to hedge their exposures.
Market risk limits are monitored by the Finance Division and
are reviewed regularly by the appropriate risk committee.
Limit violations are reported to the appropriate risk
committee and business unit managers and addressed, as
necessary. Credit risk limits are also monitored by the Finance
Division and reviewed by the appropriate risk committee.
The Investment Management Division Risk Committee
oversees market, counterparty credit and liquidity risks related
to our asset management businesses.
Business Practices Committee. The Business Practices
Committee assists senior management in its oversight of
compliance and operational risks and related reputational
concerns, seeks to ensure the consistency of our policies,
practices and procedures with our Business Principles, and
makes recommendations on ways to mitigate potential risks.
Firmwide Capital Committee. The Firmwide Capital
Committee provides approval and oversight of debt-related
transactions, including principal commitments of the  rm’s
capital. Such capital commitments include, but are not limited
to, extensions of credit, alternative liquidity commitments
and certain debt underwritings. The Firmwide Capital
Committee aims to ensure that business and reputational
standards for underwritings and capital commitments are
maintained on a global basis.
Commitments Committee. The Commitments Committee
reviews and approves underwriting and distribution activities,
primarily with respect to offerings of equity and equity-related
securities, and sets and maintains policies and procedures
designed to ensure that legal, reputational, regulatory and
business standards are maintained in conjunction with these
Goldman Sachs 2009 Annual Report
67
Management’s Discussion and Analysis