JP Morgan Chase 2013 Annual Report Download - page 110

Management’s discussion and analysis
116 JPMorgan Chase & Co./2013 Annual Report
reviews the Firm’s compensation practices as they relate to
risk and risk management in light of the Firm’s objectives,
including its safety and soundness and the avoidance of
excessive risk taking. The Committee reviews and approves
the terms of compensation award programs, including
recovery provisions, restrictive covenants and vesting
periods. The Committee also reviews and approves the
Firm’s overall incentive compensation pools and reviews
those of each of the Firm’s lines of business and Corporate/
Private Equity segment. The Committee reviews the
performance and approves all compensation awards for the
Firm’s Operating Committee on a name-by-name basis. The
full Board’s independent directors review the performance
and approve the compensation of the Firm’s CEO.
Among the Firm’s management level committees that are
primarily responsible for key risk-related functions are:
The Asset-Liability Committee (“ALCO”), chaired by the
Corporate Treasurer under the direction of the COO,
monitors the Firm’s overall liquidity risk. ALCO is
responsible for reviewing and approving the Firm’s liquidity
policy and contingency funding plan. ALCO also reviews the
Firm’s funds transfer pricing policy (through which lines of
business “transfer” interest rate and foreign exchange risk
to Treasury), overall structural interest rate risk position,
funding requirements and strategy, and the Firm’s
securitization programs (and any required liquidity support
by the Firm of such programs).
The Capital Governance Committee, chaired by the Firm’s
CFO, is responsible for reviewing the Firm’s Capital
Management Policy and the principles underlying capital
issuance and distribution alternatives. The Committee is
also responsible for governing the capital adequacy
assessment process, including overall design, assumptions
and risk streams; and, ensuring that capital stress test
programs are designed to adequately capture the
idiosyncratic risks across the Firm’s businesses.
The Firmwide Risk Committee (“FRC”) provides oversight of
the risks inherent in the Firm’s businesses, including
market, credit, principal, structural interest rate,
operational risk framework, fiduciary, reputational, country,
liquidity and model risks. The Committee is co-chaired by
the Firm’s CEO and CRO. Members of the committee include
the the Firm’s COO, LOB CEOs, LOB CROs, General Counsel,
and other senior managers from risk and control functions.
This committee serves as an escalation point for risk topics
and issues raised by the Firm’s Operating Committee, the
Line of Business Risk Committees, Firmwide Control
Committee (“FCC”) and other subordinate committees.
The Firmwide Control Committee (“FCC”) provides a forum
for senior management to review and discuss firmwide
operational risks including existing and emerging issues, as
well as operational risk metrics, management and
execution. The FCC serves as an escalation point for
significant issues raised from LOB and Functional Control
Committees, particularly those with potential enterprise-
wide impact. The FCC (as well as the LOB and Functional
Control Committees) oversees the risk and control
environment, which includes reviewing the identification,
management and monitoring of operational risk, control
issues, remediation actions and enterprise-wide trends. The
FCC escalates significant issues to the FRC.
Each LOB Risk Committee is responsible for decisions
relating to risk strategy, policy, measurement and control
within its respective LOB. The committee is co-chaired by
the LOB CRO and LOB CEO or equivalent. The committee has
a clear set of escalation rules and it is the responsibility of
committee members to escalate line of business risk topics
to the Firmwide Risk Committee as appropriate.
Other corporate functions and forums with risk
management-related responsibilities include:
The Firm’s Oversight and Control Group is comprised of
dedicated control officers within each of the lines of
business and Corporate functional areas, as well as a central
oversight team. The group is charged with enhancing the
Firm’s controls by looking within and across the lines of
business and Corporate functional areas to identify and
control issues. The group enables the Firm to detect control
problems more quickly, escalate issues promptly and get
the right people involved to understand common themes
and interdependencies among the various parts of the Firm.
The group works closely with the Firm’s other control-
related functions, including Compliance, Legal, Internal
Audit and Risk Management, to effectively remediate
identified control issues across all affected areas of the
Firm. As a result, the group facilitates the effective
execution of the Firm’s control framework and helps
support operational risk management across the Firm.
The Firmwide Valuation Governance Forum (“VGF”) is
composed of senior finance and risk executives and is
responsible for overseeing the management of risks arising
from valuation activities conducted across the Firm. The
VGF is chaired by the firmwide head of the Valuation Control
function (under the direction of the Firm’s CFO), and also
includes sub-forums for the CIB, Mortgage Bank, and
certain corporate functions, including Treasury and CIO.
In addition to the committees, forums and groups listed
above, the Firm has other management committees and
forums at the LOB and regional levels, where risk-related
topics are discussed and escalated as necessary. The
membership of these committees is composed of senior
management of the Firm including representation from the
business and various control functions. The committees
meet regularly to discuss a broad range of topics.
The JPMorgan Chase Bank N.A. Board of Directors is
responsible for the oversight of management on behalf of
JPMorgan Chase Bank N.A. The JPMorgan Chase Bank N.A.
Board accomplishes this function acting directly and
through the principal standing committees of the Firm's
Board of Directors. Risk oversight on behalf of JPMorgan
Chase Bank N.A. is primarily the responsibility of the Firm’s
DRPC, Audit Committee and, with respect to compensation-
related matters, the Compensation & Management
Development Committee.