ING Direct 2008 Annual Report Download - page 207

Within Financial Markets the focus is mainly on the daily and intraday cash and collateral positions and it is policy to sufficiently spread
day-to-day funding requirements. For this purpose the Treasury function monitors all maturing cash flows along with expected changes
in core business funding requirements.
The liquidity risk management function is delegated to CMRM, which bears the responsibility for liquidity risk stress testing and for the
identification, measurement and monitoring of the liquidity risk position. For the measurement and monitoring of the actual liquidity
position the focus is on the daily cash and collateral position. For stress testing purposes the liquidity risk positions are calculated in line
with the regulatory reporting requirements for liquidity risk of the Dutch Central Bank. For this purpose ING Bank’s weekly and monthly
liquidity positions are stress tested under a scenario that is a mix between a market event and an ING specific event. The resulting liquidity
positions are corrected for liquidity surpluses in inconvertible currencies and in locations with restrictions on capital transfer.
Contingency liquidity risk
Contingency liquidity risk relates to the organisation and planning for liquidity management in times of stress. Within ING a specific crisis
team is responsible for the liquidity management in times of crisis. This crisis team consists of the CRO, the CFO, the Executive Board
member responsible for Wholesale Banking, the Directors of CMRM and Capital Management and all the main treasurers of both ING
Bank and ING Insurance. Within ING it is policy to have adequate and up-to-date contingency funding plans in place throughout the
organisation. The main objective of ING’s contingency funding plans is to enable senior management to act effectively and efficiently
at times of crisis. The contingency funding plans are established for addressing temporary and long-term liquidity disruptions caused by
a general event in the market or an ING specific event. These plans ensure that all roles and responsibilities are clearly defined and all
necessary management information is in place. The contingency funding plans are regularly tested both on consolidated and local level
in order to be best prepared for potential liquidity risk issues.
ING INSURANCE
ING is engaged in selling a broad range of life and non-life insurance products. Risks from these products arise with respect to the
adequacy of insurance premium rate levels and provisions for insurance liabilities and capital position, as well as uncertainty as to the
future returns on investments of the insurance premiums. Risks are classified as insurance risk (actuarial and underwriting), market risk,
liquidity risk, credit risk, business risk and operational risk.
The responsibility for measurement and management of credit risk and operational risk resides with Corporate Credit Risk Management
(CCRM) and Corporate Operational Risk Management (CORM) respectively. Corporate Insurance Risk Management (CIRM) is responsible
for insurance risk (actuarial and underwriting) market risk and liquidity risk measurement and management, business risk measurement,
as well as ensuring that investment mandates adequately address credit portfolio risk.
Risk management governance
ING’s Insurance Risk Management (IRM) is organised along a functional line comprising three levels within the organisation: the corporate,
business line and business unit levels. The General Manager of CIRM, the Chief Insurance Risk Officer, heads the functional line and
reports to the Corporate CRO. Each of the business lines and business units has a similar function headed by a Chief Insurance Risk
Officer (business line and business unit CIRO). This layered, functional approach ensures consistent application of guidelines and procedures,
regular reporting and appropriate communication vertically through the risk management function, as well as providing ongoing support
for the business. The scope, roles, responsibilities and authorities of the risk management function at different levels are clearly described
in an Insurance Risk Management Governance Framework to which all consolidated business units and business lines must adhere.
The objective of the insurance risk management function is to provide the business a sustainable competitive advantage by fully integrating
risk management into the tactical daily business activities as well as ING’s broader business strategy. Insurance Risk Management
accomplishes this through four core activities. First, the IRM function ensures that products and portfolios are structured, underwritten,
priced, approved and managed appropriately in compliance with internal and external rules and guidelines. Second, IRM ensures that the
ING Insurance risk profile is transparent and well understood by management and stays within delegated authorities, with a ‘no surprises’
approach to reporting and monitoring risks. Third, IRM ensures that both risk and reward are adequately considered in the development
of business strategy, for example by supporting the planning and allocation of Economic Capital and limits during the strategic planning
process. Finally, IRM ensures that these steps are understood by ING’s stakeholders, including shareholders, rating agencies, regulators
and policy holders.
Risk management policies and tools
To ensure appropriate risk management, CIRM in close co-operation with the business line CIROs, has developed Standards of Practice
guidelines and tools to manage risks. While these standards are principle based, they include mandatory requirements to which the
business unit CIRO must adhere.
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ING Group Annual Report 2008