TD Bank 2011 Annual Report Download - page 65

TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS 63
Risk Management
The Risk Management function is headed by the CRO and provides
independent oversight and governance with respect to risk identifica-
tion, measurement, control, and monitoring and reporting. Risk
Management’s primary objective is to support a comprehensive and
proactive risk management approach that promotes a strong risk
management culture. Risk Management works with the business
segments and other corporate oversight groups to establish policies,
standards, and limits that align with TD’s risk appetite, and monitors
and reports on existing and emerging risks and compliance with TD’s
risk appetite. There is an established framework in place for the identi-
fication and assessment of emerging risks and there are clear proce-
dures for when and how risk events and issues are brought to the
attention of senior management and the Risk Committee.
Business Segments
Each business segment within TD has its own risk management func-
tion that reports directly to Risk Management and indirectly to senior
business management. This structure supports an appropriate level of
central oversight while emphasizing ownership and accountability for
risk within the business segment. Business management is responsible
for setting the business-level risk appetite and metrics, which are
reviewed by Risk Management and endorsed by the ERMC and
approved by the CEO, to align with TD’s risk appetite and manage
risk within approved risk limits as set out in TD policies.
Internal Audit
TD’s audit function provides independent assurance to the Board
of the effectiveness of risk management, control and governance
processes employed to ensure compliance with TD’s risk appetite.
Internal Audit reports on its evaluation to management and the Board.
Compliance
The Compliance group establishes risk-based programs and standards
to proactively manage known and emerging compliance risk across TD
by providing independent oversight and delivering operational control
processes to comply with the applicable legislation and regulatory
requirements.
HOW WE MANAGE RISK
TD’s risk management approach is comprehensive and proactive. It
combines the experience and specialized knowledge of individual
business segments, risk professionals, and the corporate oversight
functions. TD’s risk appetite statement is the primary means used to
communicate how TD views risk and its risk tolerances across all levels
of the organization and for all major risk categories. TD’s risk appetite
takes into account our mission, vision, guiding principles, strategy, as
well as TD’s risk philosophy and capacity to bear risk. Current operat-
ing conditions and the impact of emerging risks on TD’s strategy and
risk profile also inform how we apply TD’s risk appetite. TD’s Risk
Appetite Statement is summarized as follows:
We take risks required to build our business, but only if those risks:
1. Fit our business strategy, and can be understood and managed
2. Do not expose the enterprise to any significant single loss events; we
don’t ‘bet the bank’ on any single acquisition, business, or product
3. Do not risk harming the TD brand
RISK GOVERNANCE STRUCTURE
The key elements of our risk governance structure are:
The Board
The Board oversees TD’s strategic direction and the implementation
of an effective risk culture across the enterprise. It accomplishes its
risk management mandate both directly and through its committees,
including the Risk Committee of the Board (Risk Committee) and the
Audit Committee.
The Risk Committee
The Risk Committee is responsible for overseeing risk management
across TD. On an annual basis, the Risk Committee reviews and
approves TD’s risk appetite statement and related metrics to ensure
ongoing relevance and alignment with TD’s strategy. The Risk
Committee approves enterprise risk management policies, and
reviews actual risk profile against TD’s risk appetite.
Audit Committee
The Audit Committee, in addition to overseeing financial reporting,
assesses the adequacy and effectiveness of internal controls, including
controls over relevant risk management processes.
CEO and SET
The CEO, the Group Head and Chief Risk Officer (CRO), and other
members of the SET develop TD’s long-term strategic direction and
define TD’s risk appetite and apply it to the businesses. They manage
risk in accordance with TD’s risk appetite and consider the impact of
emerging risks on TD’s strategy and risk profile. This accountability
includes identifying and reporting significant risks to the Risk Committee.
Executive Committees
The CEO in consultation with the CRO designates TD’s Executive
Committees, which support the CEO in the overall management of
risk. These Committees are chaired by members of the SET and meet
regularly to provide oversight on governance, risk, and control at the
most senior level, and review and endorse risk management policies,
strategies, and controls.
The Enterprise Risk Management Committee (ERMC), chaired by
the CEO, provides executive oversight over all risk categories identified
in the Risk Framework. Additional Executive Committees have been
established for certain areas based on the nature of the risk and
related business activity:
• Asset / Liability and Capital Committee – chaired by the Group Head,
Corporate Development, Enterprise Strategy, and Treasury, oversees
the management of TD’s non-trading market risk and each of its
consolidated liquidity, funding, investments, and capital positions.
• Operational Risk Oversight Committee – chaired by the CRO,
oversees the strategic assessment of TD’s governance, control and
operational risk structure.
• Disclosure Committee – chaired by the Group Head, Finance and
Chief Financial Officer, ensures that appropriate controls and proce-
dures are in place and operating to permit timely, accurate, balanced
and compliant disclosure to regulators, shareholders and the market.
• Reputational Risk Committee – chaired by the CRO, oversees that
corporate or business initiatives with significant reputational risk
profiles have received adequate review for reputational risk
implications prior to implementation.