TD Bank 2006 Annual Report Download - page 62

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis
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Business Performance Review
Committee
•Chaired by the President and
Chief Executive Officer.
•Reviews overall strategies and
operating performance.
Operational Risk Oversight
Committee
•Chaired by the Chief Risk
Officer.1
•Responsible for the oversight
of all operational risk
management and legislative
compliance activities of the
Bank.
Investment Committee
•Chaired by the Chief Risk
Officer.1
•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 the Chief Risk
Officer.2
•Responsible for the oversight of
the Bank’s non-trading market
risk, consolidated liquidity and
funding position and
consolidated capital position
including foreign exchange
capital hedging.
Reputational Risk Committee
•Chaired by the Chief Risk
Officer.3
•Reviews and approves
reputational risk issues as well
as complex structured product
transactions, and establishes
and monitors policy involving
reputational risk.
Disclosure Committee
•Chaired by the Executive Vice
President and Chief Financial
Officer.
•Responsible for ensuring
appropriate controls and
procedures are in place to
permit timely, reliable and
compliant disclosure to
regulators, shareholders and
the market.
Enterprise Committee
•Chaired by the President and
Chief Executive Officer.
•Responsible for coordinating
enterprise-wide corporate
functions and execution of
merger and acquisition
transactions.
Domestic Shared Services
Committee
•Chaired by the Vice Chair,
Corporate Operations.
•Responsible for effectively
leveraging services shared by
the Canadian-based businesses.
OUR RISK GOVERNANCE STRUCTURE ESTABLISHES THAT:
•The Board of Directors and its Risk Committee are responsible
for overseeing the formation and nurturing by management of
an effective risk management culturethroughout the organiza-
tion. Together, they set the Bank’s appetite for risk through the
regular review and approval of appropriate enterprise-level risk
management policies.
•The Senior Executive Team of the Bank, chaired by the President
and Chief Executive Officer is responsible for monitoring, evalu-
ating and managing risk across the Bank as a whole.
•The President and Chief Executive Officer and the Chief Risk
Officer,with the support of other members of the Senior
Executive Team, areaccountable for identifying significant risks
and communicating them to the Board of Directors.
•Executive Committees provide enterprise-level oversight for key
risks and exposures through the review and endorsement of
risk management policies, strategies and control activities. The
Executive Committees ensure there are sufficient and qualified
risk management resources across the Bank to meet our risk
management objectives. These committees meet regularly and
hold special meetings wherewarranted.
•The corporate risk management function, headed by the Chief
Risk Officer, is responsible for setting enterprise-level policies
and practices that reflect the risk appetite of the Bank. Risk
Management also monitors and reports on discrete business
and enterprise-level risks that could have a significant impact
on the Bank’s well being. The Chief Risk Officer either chairs or
is a member of the risk focused Executive Committees.
•On an interim basis, the responsibilities of the Chief Risk Officer
areshared among certain senior members of the Risk
Management team.
•The Audit and Compliance functions independently monitor
and report to management and the Board of Directors on the
effectiveness of risk management policies, procedures and
internal controls.
•Each business unit owns and is accountable for managing risk
within the business unit, and is responsible for escalating signifi-
cant risk issues as appropriate. Business management and risk
management professionals in each business unit ensure that
policies, processes and internal controls are in place to manage
not only the business but also the risks inherent in that business.
HOW WE MANAGE RISK
The Bank has a comprehensive and proactive risk management
approach that combines the experience and specialized knowl-
edge of individual business units, risk professionals and the cor-
porate oversight functions. Our approach is designed to promote
astrong risk management culture and ensure alignment to the
Bank’s strategic objectives. It includes:
•Maintaining appropriate enterprise-wide risk management
policies and practices including guidelines, requirements and
limits to ensure risks are managed to acceptable levels.
•Subjecting risk management policies to regular review and eval-
uation by the Executive Committees and review and approval
by the Risk Committee of the Board.
•An integrated enterprise-wide risk monitoring and reporting
process that communicates key elements of the Bank’srisk
profile, both quantitatively and qualitatively,to senior manage-
ment and the Board of Directors.
•Maintaining risk measurement methodologies that support
risk quantification, including Value-at-Risk analysis, scenario
analysis and stress-testing.
•Annual self-assessments by significant business units and
corporate oversight functions of their key risks and internal
controls. Significant risk issues for the Bank are identified,
escalated and monitored as needed.
•Supporting appropriate performance measurement that
allocates risk-based economic capital to businesses and charges
acost against that capital.
•Actively monitoring internal and external risk events to assess
whether our internal controls are effective.
•Independent and comprehensive reviews conducted by the
Audit department of the quality of the internal control environ-
ment and compliance with established risk management
policies and procedures.
HOW RISK IS MANAGED ATTD BANKNORTH
As a publicly traded company, TD Banknorth actively manages
risk within its own governance structureaccording to the risks
inherent in its business. The Bank maintains oversight of the
governance and management of TD Banknorth risks in a number
of ways. Two of the Bank’s independent directors and the Chief
Executive Officer are also members of TD Banknorth’s Board.
One of these independent directors is a member of its Board
Risk Committee. Semi-annually,the Chief Risk Officer of TD
Banknorth provides an overview of TD Banknorth’s risk profile
to the Bank’s Risk Committee of the Board, and TD Banknorth
risk reports are reviewed quarterly at the Bank’s Risk Committee
meetings.
1Currently chaired by the Vice Chair, Corporate Operations, on an interim basis.
2Currently chaired by the Executive Vice President and Chief Financial
Officer, on an interim basis.
3Currently chaired by the Executive Vice President and General Counsel,
on an interim basis.
Executive Committees