TD Bank 2014 Annual Report Download - page 70

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS68
In addition to the risks described in the Managing Risk section, there
are numerous other risk factors, many of which are beyond the Bank’s
control and the effects of which can be difficult to predict, that could
cause our results to differ significantly from our plans, objectives,
and estimates. All forward-looking statements, including those in this
MD&A, are, by their very nature, subject to inherent risks and uncer-
tainties, general and specific, which may cause the Bank’s actual results
to differ materially from the expectations expressed in the forward-
looking statements. Some of these factors are discussed below and
others are noted in the “Caution Regarding Forward-Looking
Statements” section of this MD&A.
TOP AND EMERGING RISKS THAT MAY AFFECT THE BANK
AND FUTURE RESULTS
TD considers it critical to regularly assess its operating environment
and highlight top and emerging risks. These are risks with a potential
to have a material effect on the Bank and where the attention of
senior leaders is focused due to the potential magnitude or immediacy
of their impact. Many of the risks are beyond the Bank’s control and
their effects, which can be difficult to predict, could cause our results
to differ significantly from our plans, objectives, and estimates or could
impact the Bank’s reputation or sustainability of its business model.
Risks are identified, discussed, and actioned by senior risk leaders and
reported quarterly to the Risk Committee of the Board. Specific plans
to mitigate top and emerging risks are prepared, monitored, and
adjusted as required.
General Business and Economic Conditions
TD and customers of the Bank operate in Canada, the U.S., and other
countries. As a result, the Bank’s earnings are significantly affected by
the general business and economic conditions in these regions. These
conditions include short-term and long-term interest rates, inflation,
fluctuations in the debt and capital markets, real estate prices, employ-
ment levels, consumer spending and debt levels, business investment,
government spending, exchange rates, sovereign debt risks, the
strength of the economy, threats of terrorism, civil unrest, the effects
of public health emergencies, the effects of disruptions to public infra-
structure, natural disasters and the level of business conducted in a
specific region. Management maintains an ongoing awareness of the
macroeconomic environment in which it operates and incorporates
potential material changes into the portfolio stress tests that are
conducted. As a result, the Bank is better able to understand the likely
impact of many of these negative scenarios and better manage the risks.
Executing on Key Priorities and Strategies
The Bank regularly has a number of priorities and strategies, including
as detailed in each segment’s “Business Segment Analysis” section
of this document, which may include large scale initiatives that are
at various stages of development or implementation. Examples include
new acquisitions, integration of recently acquired businesses, projects
to meet new regulatory requirements or enhancement of existing
technology. Risk can be elevated due to the size, scope, and complex-
ity of projects, the limited timeframes to complete the projects and
competing priorities for limited, specialized resources.
In respect of acquisitions, the Bank undertakes thorough due diligence
before completing an acquisition and closely monitors integration
activities and performance post acquisition. However, there is no
assurance that TD will achieve its objectives, including anticipated cost
savings, or revenue synergies following acquisitions and integration.
In general, while significant management attention is in place on the
governance, oversight, methodology, tools, and resources to manage
our priorities and strategies, our ability to execute on them are depen-
dent on a number of assumptions and factors. These include those set
out in the “Business Outlook” and “Risk Management” sections of
this document, as well as on disciplined resource and expense manage-
ment and our ability to implement (and the costs associated with the
implementation of) enterprise-wide programs to comply with new or
enhanced regulations or regulator demands, all of which may not be
in the Bank’s control and are difficult to predict.
If any of the Bank’s acquisition, strategic plans or priorities do not
meet with success, there could be an impact on the Bank’s operations
and financial performance and the Bank’s earnings could grow more
slowly or decline.
Technology and Information Security Risk
Technology and information security risks for large financial institutions
like the Bank have increased in recent years. This is due, in part, to the
proliferation, sophistication and constant evolution of new technologies
and attack methodologies used by socio political entities, organized
criminals, hackers and other external parties. The increased risks are
also a factor of our size and scale of operations, our geographic foot-
print, and our use of internet and telecommunications technologies to
conduct financial transactions, such as our continued development of
mobile and internet banking platforms. The Bank’s technologies,
systems and networks, and those of our customers and the third parties
providing services to us, may be subject to attacks, breaches or other
compromises. These may include cyber-attacks such as targeted attacks
on banking systems and applications, malicious software, denial of
service attacks, phishing attacks and theft of data. The Bank actively
monitors, manages and continues to enhance its ability to mitigate
these technology and information security risks through enterprise-
wide programs, industry best practices, and robust threat and vulnera-
bility assessments and responses. It is possible that the Bank, or those
with whom the Bank does business, may not anticipate or implement
effective measures against all such risks, particularly because the
techniques used change frequently and risks can originate from a wide
variety of sources that have also become increasingly sophisticated.
As such, with any attack, breach or compromise of technology or
information systems, hardware or related processes, the Bank may
experience, among other things, financial loss, a loss of customer or
business opportunities, disruption to operations, misappropriation or
unauthorized release of confidential, financial or personal information,
litigation, regulatory penalties or intervention, remediation, investiga-
tion or restoration cost, and reputational damage.
RISK FACTORS AND MANAGEMENT
Risk Factors That May Affect Future Results