JP Morgan Chase 2010 Annual Report Download - page 148

Management’s discussion and analysis
148 JPMorgan Chase & Co./2010 Annual Report
bers. Such information supplements the Firm’s ongoing operational
risk measurement and analysis.
Risk reporting and analysis
Operational risk management reports provide timely and accurate
information, including information about actual operational loss levels
and self-assessment results, to the lines of business and senior man-
agement. The purpose of these reports is to enable management to
maintain operational risk at appropriate levels within each line of
business, to escalate issues and to provide consistent data aggrega-
tion across the Firm’s businesses and support areas.
Audit alignment
Internal Audit utilizes a risk-based program of audit coverage to
provide an independent assessment of the design and effectiveness of
key controls over the Firm’s operations, regulatory compliance and
reporting. This includes reviewing the operational risk framework, the
effectiveness of the business self-assessment process, and the loss
data-collection and reporting activities.
REPUTATION AND FIDUCIARY RISK MANAGEMENT
The Firm’s success depends not only on its prudent management of
the liquidity, credit, market and operational risks that are part of its
business risk, but equally on the maintenance among its many
constituents—customers and clients, investors, regulators, as well
as the general public—of a reputation for business practices of the
highest quality. Attention to reputation has always been a key
aspect of the Firm’s practices, and maintenance of the Firm’s repu-
tation is the responsibility of each individual employee at the Firm.
JPMorgan Chase bolsters this individual responsibility in many
ways, including through the Firm’s Code of Conduct, which is
based on the Firm’s fundamental belief that no one should ever
sacrifice integrity—or give the impression that he or she has—even
if one thinks it would help the Firm’s business. The Code requires
prompt reporting of any known or suspected violation of the Code,
any internal Firm policy, or any law or regulation applicable to the
Firm’s business. It also requires the reporting of any illegal conduct,
or conduct that violates the underlying principles of the Code, by
any of our customers, suppliers, contract workers, business partners
or agents. Concerns may be reported anonymously and the Firm
prohibits retaliation against employees for the good faith reporting
of any actual or suspected violations of the Code.
In addition to training of employees with regard to the principles
and requirements of the Code, and requiring annual affirmation by
each employee of compliance with the Code, the Firm has estab-
lished policies and procedures, and has in place various oversight
functions, intended to promote the Firm’s culture of “doing the
right thing”. These include a Conflicts Office which examines
wholesale transactions with the potential to create conflicts of
interest for the Firm. In addition, each line of business has a risk
committee which includes in its mandate oversight of the reputa-
tional risks in its business that may produce significant losses or
reputational damage. In IB, there is a separate Reputation Risk
Office and several regional reputation risk committees, members of
which are senior representatives of businesses and control func-
tions, that focus on transactions that raise reputational issues. Such
transactions may include, for example, complex derivatives and
structured finance transactions. The Firm also established this year
a Consumer Reputational Risk Committee, comprised of senior
management from the Firm’s Operating Committee, including the
heads of its primary consumer facing businesses, RFS and CS,
that helps to ensure that the Firm has a consistent, disciplined
focus on the review of the impact on consumers of Chase products
and practices, including any that could raise reputational issues.
Fiduciary Risk Management
The Fiduciary Risk Management function works with relevant line of
business risk committees, with the goal of ensuring that businesses
providing investment or risk management products or services that
give rise to fiduciary duties to clients perform at the appropriate
standard relative to their fiduciary relationship with a client. Of
particular focus are the policies and practices that address a busi-
ness’ responsibilities to a client, including performance and service
requirements and expectations; client suitability determinations;
and disclosure obligations and communications. In this way, the
relevant line of business risk committees, together with the Fiduci-
ary Risk Management function, provide oversight of the Firm’s
efforts to monitor, measure and control the performance and risks
that may arise in the delivery of products or services to clients that
give rise to such fiduciary duties, as well as those stemming from
any of the Firm’s fiduciary responsibilities under the Firm’s various
employee benefit plans.