TD Bank 2003 Annual Report Download - page 35

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis 33
At TD Bank Financial Group, our goal is to earn satisfactory
returns from our various business activities within an acceptable
level of risk. To do this, we need to understand the risks involved
in our businesses and ensure that the risks we assume are within
prudent limits. Managing risk means assessing the potential
impact of each risk, and establishing policies, procedures and
internal controls to mitigate them to an acceptable level.
The Enterprise Risk Framework
To effectively manage risk, we first consider the different kinds
of risk to which we are exposed. Our Enterprise Risk Framework
forms the basis of communicating, monitoring and reporting on
risks within the Bank. It is a dynamic model, reflecting those key
risks that could impact the achievement of our business objectives
and strategies. The major categories of risk and their relation-
ships to each other are set out in our Enterprise Risk Framework:
Through our strategic planning process and within the context
of the environments in which we operate, we develop strategies
for our various business units. In implementing those strategies,
we expose ourselves to the credit, market, operational, liquidity,
investment and regulatory risks shown in the centre of the
Framework. It is our ability to manage risks in those areas that
determines the extent to which the Bank’s overall reputation and
capital is at risk.
Governance framework for risk management
Our governance framework for Risk Management has been put
in place to ensure effective decision making, prioritization and
resource allocation regarding risk, and establishes the following
accountabilities:
•Business units own and are accountable for managing risk
within the business unit. The business unit ensures that poli-
cies, processes and internal controls are in place to manage
the business and the risks inherent to that business;
•The Risk Management function of the Bank is responsible for
setting standards and policies that reflect the risk appetite of
the Bank through which they enable the business to manage
its risk. They also facilitate the identification and escalation of
significant, aggregate risks for resolution at the Executive level;
•The Compliance and Audit functions report to management
and the Board that appropriate risk management policies,
procedures and internal controls are in place and are
being followed;
Managing Risk
•The Senior Executive Team monitors, evaluates and manages
risk from the enterprise perspective. To enable this, infor-
mation flows to the Senior Executive Team from the business
units and from the corporate oversight functions, which are
Risk Management, Audit, Legal, Compliance, Finance and
Human Resources. The President and CEO and the EVP and
Chief Risk Officer with the support of the other members of
the Senior Executive Team, are accountable for identifying and
communicating to the Board those risks deemed significant; and
•The Board and the Senior Executive Team establish the control
culture for the organization through the clear communication
of mandates and accountabilities and through the articulation
of the organization’s operational and strategic goals with
respect to risk and control. This message is carried to all
employees through the business units and the corporate
oversight functions.
Risk management governance structure
To ensure that information about significant risks flow to the
Board and the Senior Executive Team from the business units and
corporate oversight functions, the Bank has established a formal
risk management governance structure. Illustrated below, this
structure is closely aligned with the Enterprise Risk Framework.
Business Environment Risk
Strategic Risk
Reputational Risk
Credit
Risk
Market
Risk
Operational
Risk
Investment
Risk
Regulatory
Risk
Liquidity
Risk
Executive Management Committees
Risk Committee of the Board
•Considers risk and associated trends in risk for the Bank
•Approves risk management policies
•Oversees the management of all risks
•Monitors the risk profile of the Bank
Senior Executive Team
•Chaired by President and CEO
•Determines overall strategies
•Monitors performance to strategies
•Monitors and evaluates risk
•Oversees the implementation of risk mitigation strategies
Credit and
Market Risk
Committee
•Chaired by
President and
CEO
•Reviews large
individual credits,
industry
concentrations
and major policy
issues involving
credit or market
risk
Business
Performance
Review
Committee
•Chaired by
President and
CEO
•Reviews overall
strategies and
operating
performance
Operational Risk
Oversight
Committee
•Chaired by EVP
and Chief Risk
Officer
•Responsible for
the management
and oversight of
all operational
risk management
and legislative
compliance
activities of the
Bank
Investment Committee
•Chaired by President and
CEO
•Reviews the performance of
all significant investments,
including the Bank’s own
portfolio and client
mandates, managed by
internal and external
portfolio managers
Asset/Liability Committee
•Chaired by EVP and CFO
•Responsible for the oversight
of the Bank’s non-trading
market risk, consolidated
liquidity & funding position
and consolidated capital
position including foreign
exchange capital hedging