Morgan Stanley 2015 Annual Report Download - page 106

the steps management has taken to monitor and control such exposures; and oversees the Company’s business continuity
planning. The BOTC reports to the entire Board on a regular basis.
Firm Risk Committee. The Board has also authorized the FRC, a management committee appointed and chaired by the
Chief Executive Officer, which includes the most senior officers of the Company, including the Chief Risk Officer, Chief
Legal Officer and Chief Financial Officer, to oversee the global ERM framework. The FRC’s responsibilities include
oversight of the Company’s risk management principles, procedures and limits and the monitoring of capital levels and
material market, credit, operational, liquidity and funding, franchise and reputational risk matters, and other risks, as
appropriate, and the steps management has taken to monitor and manage such risks. The FRC also establishes and
communicates risk tolerance, including aggregate Company limits and tolerance, as appropriate. The Governance Process
Review Subcommittee of the FRC oversees governance and process issues on behalf of the FRC. The FRC reports to the
entire Board, the BAC, the BOTC and the BRC through the Chief Risk Officer, Chief Financial Officer and Chief Legal
Officer.
Functional Risk and Control Committees. Functional risk and control committees comprising the ERM framework,
including the Firm Credit Risk Committee, the Operational Risk Oversight Committee, the Asset/Liability Management
Committee, the Global Compliance Committee, the Technology Governance Committee and the Firm Franchise Committee,
facilitate efficient and comprehensive supervision of the Company’s risk exposures and processes. The Strategic
Transactions Committee reviews large strategic transactions and principal investments for the Company; the CCAR/RRP
Committee oversees the Company’s Comprehensive Capital Analysis and Review, Dodd-Frank Act Stress Testing and Title I
Resolution Plan and Recovery Plan; the Global Legal Entity Oversight and Governance Committee monitors the governance
framework that operates over the Company’s consolidated legal entity population; the FHC Governance Committee oversees
the Company’s initiatives relating to its status as a financial holding company; various commitment and underwriting
committees are responsible for reviewing capital, lending and underwriting commitments on behalf of the Company; and the
Culture, Values and Conduct Committee is charged with developing Company-wide standards and overseeing initiatives
relating to culture, values and conduct, including training and enhancements to performance and compensation processes.
In addition, each business segment has a risk committee that is responsible for helping to ensure that the business segment, as
applicable, adheres to established limits for market, credit, operational and other risks; implements risk measurement,
monitoring, and management policies, procedures, controls and systems that are consistent with the risk framework
established by the FRC; and reviews, on a periodic basis, its aggregate risk exposures, risk exception experience, and the
efficacy of its risk identification, measurement, monitoring and management policies and procedures, and related controls.
Chief Risk Officer. The Chief Risk Officer, who is independent of business units, reports to the Chief Executive Officer and
the BRC. The Chief Risk Officer oversees compliance with the Company’s risk limits; approves exceptions to the
Company’s risk limits; independently reviews material market, credit, liquidity and operational risks; and reviews results of
risk management processes with the Board, the BRC and the BAC, as appropriate. The Chief Risk Officer also coordinates
with the Chief Financial Officer regarding capital and liquidity management and works with the Compensation, Management
Development and Succession Committee of the Board to help ensure that the structure and design of incentive compensation
arrangements do not encourage unnecessary and excessive risk taking.
Internal Audit Department. The Internal Audit Department provides independent risk and control assessment and reports to
the BAC. The Internal Audit Department provides an independent assessment of the Company’s control environment and
risk management processes using a risk-based methodology developed from professional auditing standards. The Internal
Audit Department also assists in assessing the Company’s compliance with internal guidelines set for risk management and
risk monitoring, as well as external rules and regulations governing the industry. It effects these responsibilities through risk-
based reviews of the Company’s processes, activities, products or information systems; targeted reviews of specific controls
and activities; pre-implementation reviews of new or significantly changed processes, activities, products or information
systems; and special investigations required as a result of internal factors or regulatory requests.
Independent Risk Management Functions. The independent risk management functions (Market Risk, Credit Risk,
Operational Risk and Liquidity Risk Management Departments) are independent of the Company’s business units. These
functions assist senior management and the FRC in monitoring and controlling the Company’s risk through a number of
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