TD Bank 2011 Annual Report Download - page 78

TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS76
Reputational Risk
Reputational risk is the potential that negative stakeholder impressions,
whether true or not, regarding an institution’s business practices,
actions or inactions, will or may cause a decline in the institution’s
value, brand, liquidity or customer base.
A company’s reputation is a valuable business asset in its own right,
essential to optimizing shareholder value and, as such, is constantly at
risk. Reputational risk can arise as a consequence of any organization’s
activities and cannot be managed in isolation from other forms of risk.
All risks can have an impact on reputation, which in turn can impact
the brand, earnings and capital.
WHO MANAGES REPUTATIONAL RISK
Ultimate responsibility for TD’s reputation lies with the SET and the
executive committees that examine reputational risk as part of their
regular mandate. The Reputational Risk Committee is the executive
committee with enterprise-wide responsibility for making decisions on
reputational risks. The Committee’s purpose is to ensure that new and
existing business activities, transactions, products or sales practices
that are referred to it are reviewed at a sufficiently broad and senior
level so that the associated reputational risk issues are fully considered.
Nonetheless, every employee and representative of our organization
has a responsibility to contribute in a positive way to our reputation.
This means ensuring ethical practices are followed at all times, interac-
tions with our stakeholders are positive, and we comply with applicable
policies, legislation and regulations. Reputational risk is most effectively
managed when every individual works continuously to protect and
enhance our reputation.
HOW WE MANAGE REPUTATIONAL RISK
Our enterprise-wide Reputational Risk Management Policy is approved
by the Risk Committee of the Board. This policy sets out the framework
under which each business unit is required to implement a reputational
risk policy and procedures. These include designating a business-level
committee to review reputational risk issues and to identify issues to
be brought to the Reputational Risk Committee.
We also have defined and documented processes to approve new
products and new business, particularly structured transactions in our
Wholesale business. These processes involve committees with represen-
tation from the businesses and control functions, and include consider-
ation of all aspects of a new product, including reputational risk.
Environmental Risk
Environmental risk is the possibility of loss of strategic, financial, opera-
tional or reputational value resulting from the impact of environmental
issues or concerns within the scope of short-term and long-term cycles.
Management of environmental risk is an enterprise-wide priority.
Key environmental risks include: 1) direct risks associated with the
ownership and operation of our business, which includes management
and operation of company-owned or managed real estate, fleet, busi-
ness operations and associated services; 2) indirect risks associated
with the environmental performance of clients to whom TD provides
financing or in which TD invests; 3) identification and management of
emerging environmental regulatory issues; and 4) failure to understand
and appropriately leverage environment-related trends to meet
customer and consumer demands for products and services.
WHO MANAGES ENVIRONMENTAL RISK
The Executive Vice President Community, Environment and Chief
Marketing Officer holds senior executive accountability for environ-
mental management. The Executive Vice President is supported by the
Chief Environment Officer who leads the Corporate Environmental
Affairs team. The Corporate Environmental Affairs team is responsible
for developing environmental strategy, setting environmental perfor-
mance standards and targets, and reporting on performance. There
is also an enterprise-wide Environmental Steering Committee (ESC)
composed of senior executives from TD’s main business units and
corporate functions. The ESC is responsible for approving environmental
strategy and performance standards, and communicating these
throughout the business. TD’s business units are responsible for
implementing the environmental strategy within their units.
HOW WE MANAGE ENVIRONMENTAL RISK
We manage environmental risks within the Environmental Management
System (EMS) which consists of three components: an Environmental
Policy, an Environmental Management Framework and Environmental
Procedures and Processes. In 2011, we updated our EMS to be consis-
tent with the ISO 14001 international standard, which represents indus-
try best practice. Our Environmental Policy was updated to reflect the
global scope of TD’s environmental activities.
Within our Environmental Management Framework, we have identi-
fied a number of priority areas and have made voluntary commitments
relating to these.
Our environmental performance is publicly reported within our annual
Corporate Responsibility Report. Performance is reported according to the
Global Reporting Initiative (GRI) and is independently assured.
TD’s global operations maintained carbon neutral status in 2011.
We accomplished this by reducing our energy use and purchasing
electricity from renewable energy sources. We continued to develop
innovative carbon offsets, sourced from within our North American
operating footprint.
During 2011, TD completed the roll out of updated Environmental
and Social Credit Risk Management Procedures applied to credit and
lending in the wholesale, commercial and retail businesses. These
procedures include assessment of our clients’ policies, procedures and
performance on material environmental and related social issues, such
as climate risk, biodiversity, water risk, stakeholder engagement, free,
prior and informed consent of Aboriginal peoples. Within Wholesale
Banking, sector-specific guidelines have been developed for environ-
mentally-sensitive sectors. TD has been a signatory to the Equator
Principles since 2007 and reports on Equator Principle projects within
our annual Corporate Responsibility Report.
TD Asset Management (TDAM) is a signatory to the United Nations
Principles for Responsible Investment (UN PRI). Under the UN PRI,
investors commit to incorporate environmental and social issues into
investment analysis and decision-making. TDAM applies its Sustainable
Investing Policy across its operations. The Policy provides information
on how TDAM is implementing the UN PRI.
We proactively monitor and assess policy and legislative develop-
ments, and maintain an ‘open door’ approach with environmental
and community organizations, industry associations and responsible
investment organizations.
For more information on our environmental policy, management and
performance, please refer to our Corporate Responsibility Report, which
is available at our website: http://www.td.com/corporateresponsibility/.
TD Ameritrade
HOW RISK IS MANAGED AT TD AMERITRADE
TD Ameritrade’s management is primarily responsible for managing
risk at TD Ameritrade under the oversight of TD Ameritrade’s Board
particularly through its Risk Committee and Audit Committee of the
Board. TD monitors the risk management process at TD Ameritrade
through its participation in TD Ameritrade’s board and management
governance and protocols.
Five of the twelve TD Ameritrade directors are designated by TD,
including our CEO and two independent directors of TD, pursuant to
the terms of a Stockholders Agreement among TD, TD Ameritrade and
certain other stockholders. TD Ameritrade’s bylaws, which state that
the Chief Executive Officer’s appointment requires approval of two-
thirds of the Board, ensure the selection of TD Ameritrade’s Chief
Executive Officer attains the broad support of the TD Ameritrade Board
which currently would require the approval of at least one director
designated by TD. The Stockholders Agreement stipulates that the
Board committees of TD Ameritrade must include at least two TD
designated directors, subject to TD’s percentage ownership in TD
Ameritrade and certain other limited exceptions. Currently, the direc-
tors we designate participate in a number of TD Ameritrade Board
committees, including chairing the Audit Committee and the HR and
Compensation Committee and participating in the Risk Committee and
Corporate Governance Committee.