Goldman Sachs 2012 Annual Report Download - page 78

Management’s Discussion and Analysis
In the table above:
‰Obligations maturing within one year of our financial
statement date or redeemable within one year of our
financial statement date at the option of the holder are
excluded and are treated as short-term obligations.
‰Obligations that are repayable prior to maturity at our
option are reflected at their contractual maturity dates
and obligations that are redeemable prior to maturity at
the option of the holders are reflected at the dates such
options become exercisable.
‰Amounts included in the table do not necessarily reflect
the actual future cash flow requirements for these
arrangements because commitments and guarantees
represent notional amounts and may expire unused or be
reduced or cancelled at the counterparty’s request.
‰Due to the uncertainty of the timing and amounts that
will ultimately be paid, our liability for unrecognized tax
benefits has been excluded. See Note 24 to the
consolidated financial statements for further information
about our unrecognized tax benefits.
See Notes 15 and 18 to the consolidated financial
statements for further information about our short-term
borrowings, and commitments and guarantees.
As of December 2012, our unsecured long-term borrowings
were $167.31 billion, with maturities extending to 2061,
and consisted principally of senior borrowings. See Note 16
to the consolidated financial statements for further
information about our unsecured long-term borrowings.
As of December 2012, our future minimum rental
payments net of minimum sublease rentals under
noncancelable leases were $3.19 billion. These lease
commitments, principally for office space, expire on
various dates through 2069. Certain agreements are subject
to periodic escalation provisions for increases in real estate
taxes and other charges. See Note 18 to the consolidated
financial statements for further information about
our leases.
Our occupancy expenses include costs associated with
office space held in excess of our current requirements. This
excess space, the cost of which is charged to earnings as
incurred, is being held for potential growth or to replace
currently occupied space that we may exit in the future. We
regularly evaluate our current and future space capacity in
relation to current and projected staffing levels. For the year
ended December 2012, total occupancy expenses for space
held in excess of our current requirements were not
material. In addition, for the year ended December 2012,
we incurred exit costs of $17 million related to our office
space. We may incur exit costs (included in “Depreciation
and amortization” and “Occupancy”) in the future to the
extent we (i) reduce our space capacity or (ii) commit to, or
occupy, new properties in the locations in which we operate
and, consequently, dispose of existing space that had been
held for potential growth. These exit costs may be material
to our results of operations in a given period.
Overview and Structure of Risk
Management
Overview
We believe that effective risk management is of primary
importance to the success of the firm. Accordingly, we have
comprehensive risk management processes through which
we monitor, evaluate and manage the risks we assume in
conducting our activities. These include market, credit,
liquidity, operational, legal, regulatory and reputational
risk exposures. Our risk management framework is built
around three core components: governance, processes
and people.
Governance. Risk management governance starts with
our Board, which plays an important role in reviewing and
approving risk management policies and practices, both
directly and through its Risk Committee, which consists of
all of our independent directors. The Board also receives
regular briefings on firmwide risks, including market risk,
liquidity risk, credit risk and operational risk from our
independent control and support functions, including the
chief risk officer. The chief risk officer, as part of the review
of the firmwide risk package, regularly advises the Risk
Committee of the Board of relevant risk metrics and
material exposures. Next, at the most senior levels of the
firm, our leaders are experienced risk managers, with a
sophisticated and detailed understanding of the risks we
take. Our senior managers lead and participate in risk-
oriented committees, as do the leaders of our independent
control and support functions — including those in internal
audit, compliance, controllers, credit risk management,
human capital management, legal, market risk
management, operations, operational risk management,
tax, technology and treasury.
76 Goldman Sachs 2012 Annual Report