ING Direct 2009 Annual Report Download - page 25

Risk management
ING continued to take risk mitigating measures, but was still
negatively impacted by markets that remain illiquid, even though
some markets improved during 2009. Primarily markets for real
estate, and assets with real estate underlying, remained impacted
by continued turmoil. 2009 was also the year of proposed changes
in regulations, many of which may impact risk management, risk
measurement and the financial condition of ING going forward.
Next to the steps taken to reduce the risk profile via risk mitigation,
ING also worked on applying lessons learned from events in
previous years. These lessons applied primarily to risk governance,
risk measurement and risk appetite. The risk governance was
enhanced with a Risk Committee at Supervisory Board level.
During 2009 ING worked on further improving and simplifying
the risk measurement and appetite methodology.
ING’S RISK MANAGEMENT ORGANISATION
Taking measured risks is part of ING’s business. As a financial
services company active in banking, investments, life insurance and
retirement services, ING is naturally exposed to a variety of risks. To
ensure measured risk-taking ING has integrated risk management in
its daily business activities and strategic planning. Risk Management
assists with the formulation of risk appetite, strategies, policies and
limits and provides a review, oversight and support function
throughout the Group on risk-related issues.
ING Risk Management’s mission is to build a sustainable
competitive advantage by fully integrating risk management
into daily business activities and strategic planning. The following
principles support this objective:
products and portfolios are structured, underwritten, priced, •
approved and managed appropriately, and compliance with
internal and external rules and guidelines is monitored;
ING’s risk profile is transparent, managed to avoid surprises, •
and consistent with delegated authorities; and
transparent communications are maintained with internal and •
external stakeholders on risk management and value creation.
The recent market turmoil underscores the importance of living
by this risk mission statement.
In recent years, ING has systematically improved its risk
management capabilities with investments in people, governance,
processes, measurement tools and systems. This has become
necessary as investor demands have increased, and regulation
continues to evolve with market practices.
RISK MANAGEMENT SUPPORTS THE BUSINESS
Risk Management benefits ING and its shareholders directly
by providing more efficient capitalisation and lower costs of
risk and funding. The cost of capital is reduced by working closely
with rating agencies and regulators to align capital requirements
to risks. Risk Management helps business units to lower funding
costs, make use of the latest risk management tools and skills,
and lower strategic risk, allowing them to focus on their core
expertise with the goal of making ING’s businesses more
competitive in their markets.
Risk measurement allows ING to identify portfolios generating
economic value. Risk management can help identify the most
economically promising areas as well as those businesses that
are underperforming and in some cases need to be sold.
DETERMINING THE RISK APPETITE
The risk appetite for ING is set by the Executive Board and
ratified by the Risk Committee of the Supervisory Board. This
Risk Committee was established in 2009 to enhance the ING Risk
Governance, and to allow a more forward-looking discussion on
risk among Supervisory Board members. Owing to this structure
the audit committee and risk committee each cover a singular topic,
and it ensures an increased focus on both financial reporting and
risk related topics.
ING’s risk governance framework ensures that the risk appetite
is communicated and enforced throughout the Group. The
framework contains three lines of defence: the business lines
themselves, which have the primary responsibility for day-to-day
Pre-tax P&L impact impairments, fair value changes
and trading losses
in EUR million 2009 2008
US subprime RMBS –350 –120
Alt-A RMBS –1,405 –2,064
CDOs/CLOs 133 –394
CMBS –25 0
Total –1,647 –2,578
US subprime RMBS, Alt-A RMBS, CDO/CLO and CMBS exposures
and revaluations at year-end 2009
in EUR million
Market
value
Pre-tax
revaluation
via equity
US subprime RMBS 1,428 –811
Alt-A RMBS 2,964 –239
CDO/CLO 4,087 –127
CMBS 7,711 –1,834
Total 16,190 –3,011
Continued risk mitigation to get Back to Basics
ING Group Annual Report 2009 23