Enterprise Risk Management (ERM)

ABN AMRO Business Unit North America (BU NA)

Overview for ERM Committee

April 11, 2007

Table of Contents

1 ERM is all about integration

2 Four stages of the ERM Process

3 Characteristics and sources of effective KRIs

4 An ERM Dashboard should address 5 key questions

5 Hallmark of success in ERM

2
ERM is all about integration
Risk factors strategic, business, credit, market and operational

Oversight governance, risk and compliance

Analytical models data standards, modeling, assumptions, stressed

scenarios

Information flows risk vs. performance; internal vs. external

Business processes strategic planning, M&A, product development, pricing,

performance measurement

Source: James Lams Presentation, Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services

3
Four stages of the ERM process

Risk Risk Risk

ERM
Identification & Measurement Mitigation and
Foundations
Assessment and Reporting Management

Governance structure Top-down risk KRIs Resolution of issues

Resource allocation assessments Performance vs. Product & Customer
ERM Framework Bottom-up risk Standards Management
Risk policies assessments Dashboard reporting Risk-adjusted
Incentive systems Audit reviews (Management, Board) pricing
Education & Training Independent Public disclosure Investment, funding
assessments (regulators, & capital strategies
consultants, customers) Risk transfer

Source: James Lams Presentation, Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services

4
Characteristics and sources of effective KRIs

KRIs

Strategic Regulations Losses and Stakeholder

Objectives and Policies Incidents Requirements

Business Plans Legal requirements Actual losses Investors

Management Goals Regulatory standards Incidents Business Partners
Performance Metrics Policy limits Industry data Other

Source: James Lams Presentation, Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services

5
ERM Dashboard should address 5 key questions
1. Are any of our business objectives at risk?

2. Are we in compliance with policies and regulations?

3. What risk incidents have been escalated?

4. What KRIs and trends require immediate attention?

5. What risk assessments need to be reviewed?

Source: James Lams Presentation, Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services

6
Hallmark of success in ERM
Tone from the top engaged senior management and Board of Directors

Establishment of policies, systems and processes supported by a

strong risk culture

Clearly defined risk appetite with respect to risk limits and business
boundaries

Robust risk analytics - summarized in an ERM Dashboard for executive

and Board reporting

Risk-return management via integration of ERM into strategic planning,

business processes, performance measurement and incentive compensation
Source: James Lams Presentation, Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services