Goldman Sachs 2012 Annual Report Download - page 64

Management’s Discussion and Analysis
Business-Specific Limits. The Firmwide Finance
Committee sets asset and liability limits for each business
and aged inventory limits for certain financial instruments
as a disincentive to hold inventory over longer periods of
time. These limits are set at levels which are close to actual
operating levels in order to ensure prompt escalation and
discussion among business managers and managers in our
independent control and support functions on a routine
basis. The Firmwide Finance Committee reviews and
approves balance sheet limits on a quarterly basis and may
also approve changes in limits on an ad hoc basis in
response to changing business needs or market conditions.
Monitoring of Key Metrics. We monitor key balance
sheet metrics daily both by business and on a consolidated
basis, including asset and liability size and composition,
aged inventory, limit utilization, risk measures and capital
usage. We allocate assets to businesses and review and
analyze movements resulting from new business activity as
well as market fluctuations.
Scenario Analyses. We conduct scenario analyses to
determine how we would manage the size and composition
of our balance sheet and maintain appropriate funding,
liquidity and capital positions in a variety of situations:
‰These scenarios cover short-term and long-term time
horizons using various macro-economic and firm-specific
assumptions. We use these analyses to assist us in
developing longer-term funding plans, including the level
of unsecured debt issuances, the size of our secured
funding program and the amount and composition of our
equity capital. We also consider any potential future
constraints, such as limits on our ability to grow our asset
base in the absence of appropriate funding.
‰Through our Internal Capital Adequacy Assessment
Process (ICAAP), CCAR, the stress tests we are required
to conduct under the Dodd-Frank Act, and our resolution
and recovery planning, we further analyze how we would
manage our balance sheet and risks through the duration
of a severe crisis and we develop plans to access funding,
generate liquidity, and/or redeploy or issue equity capital,
as appropriate.
Balance Sheet Allocation
In addition to preparing our consolidated statements of
financial condition in accordance with U.S. GAAP, we
prepare a balance sheet that generally allocates assets to our
businesses, which is a non-GAAP presentation and may not
be comparable to similar non-GAAP presentations used by
other companies. We believe that presenting our assets on
this basis is meaningful because it is consistent with the way
management views and manages risks associated with the
firm’s assets and better enables investors to assess the
liquidity of the firm’s assets. The table below presents a
summary of this balance sheet allocation.
As of December
in millions 2012 2011
Excess liquidity (Global Core Excess) $174,622 $171,581
Other cash 6,839 7,888
Excess liquidity and cash 181,461 179,469
Secured client financing 229,442 283,707
Inventory 318,323 273,640
Secured financing agreements 76,277 71,103
Receivables 36,273 35,769
Institutional Client Services 430,873 380,512
ICBC 12,082 4,713
Equity (excluding ICBC) 21,267 23,041
Debt 25,386 23,311
Receivables and other 8,421 5,320
Investing & Lending 57,156 56,385
Total inventory and related assets 488,029 436,897
Other assets 239,623 23,152
Total assets $938,555 $923,225
1. In January 2013, we sold approximately 45% of our ordinary shares of ICBC.
2. Includes assets related to our reinsurance business classified as held for sale
as of December 2012. See Note 12 to the consolidated financial statements
for further information.
62 Goldman Sachs 2012 Annual Report