Voya 2013 Annual Report Download - page 217

investments are accounted for as investments available-for-sale as described in “Item 8. Note 4. Fair Value
Measurements (excluding Consolidated Investment Entities)” and unrealized capital gains (losses) on these
securities are recorded directly in AOCI, except for certain RMBS which are accounted for under the FVO,
whose change in fair value is reflected in Other net realized gains (losses) in the Consolidated Statements of
Operations. Our maximum exposure to loss on these structured investments is limited to the amount of our
investment. See “Item 8. Note 2. Investments (excluding Consolidated Investment Entities)” for details regarding
the carrying amounts and classifications of these assets.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk that our consolidated financial position and results of operations will be affected by
fluctuations in the value of financial instruments. We have significant holdings in financial instruments and are
naturally exposed to a variety of market risks. The main market risks we are exposed to include credit risk,
interest rate risk and equity market price risk. We do not have material market risk exposure to “trading”
activities in our Consolidated Financial Statements.
Risk Management
As a financial services company active in Retirement, Investment Management and Insurance, taking
measured risks is part of our business. As part of our effort to ensure measured risk taking, we have integrated
risk management in our daily business activities and strategic planning.
We place a high priority on risk management and risk control. We have comprehensive risk management
and control procedures in place at all levels and have established a dedicated risk management function with
responsibility for the formulation of our risk appetite, strategies, policies and limits. The risk management
function is also responsible for monitoring our overall market risk exposures and provides review, oversight and
support functions on risk-related issues.
Our risk appetite is aligned with how our businesses are managed and anticipates future regulatory
developments. In particular, our risk appetite is aligned with regulatory capital requirements applicable to our
regulated insurance subsidiaries as well as metrics that are aligned with various ratings agency models.
Our risk governance and control systems enable us to identify, control, monitor and aggregate risks and
provide assurance that risks are being measured, monitored and reported adequately and effectively. To promote
measured risk taking, we have integrated risk management with our business activities and strategic planning
through a strategy to manage risk in accordance with the following three principles:
1. Management of the businesses has primary responsibility for the day-to-day management of risk and
forms the first line of defense.
2. The risk management function, both at the corporate and the business level, has the primary
responsibility to align risk taking with strategic planning through risk tolerance and limit setting and
forms the second line of defense. Risk managers in the businesses have direct reporting lines to the
Chief Risk Officer (“CRO”).
3. The internal audit function provides an ongoing independent (i.e., outside of the risk organization) and
objective assessment of the effectiveness of internal controls, including financial and operational risk
management and forms the third line of defense.
Our risk management is organized along a functional line comprising two levels within the organization: the
corporate and business levels. The CRO heads the functional line, and each of the businesses has a similar
function that reports to the CRO. This layered, functional approach is designed to promote consistent application
of guidelines and procedures, regular reporting and appropriate communication vertically through the risk
management function, as well as to provide ongoing support for the business. The scope, roles, responsibilities
and authorities of the risk management function at different levels are described in an Insurance Risk
Management Governance Framework to which all businesses must adhere.
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