Objectives of a Sound Enterprisewide Risk Management Framework Manage uncertainty embedded in business operations in order to –increase confidence in the achievement of the bank’s objectives, –protect its reputation and –minimize its financial losses  reducing earning volatility. Helping to achieve a sound balance between expected benefits, costs and risks of the bank’s operations. Optimizing cost/benefit trade-off between the bank’s risks and controls Promoting risk awareness in bank’s culture and values.

FOUNDATION Risk strategy, tolerance Roles and responsibilities Policies and procedures Risk definition and categorization INFORMATION Expected Loss – how much do I lose on average Unexpected Loss – how much I could reasonably expect to lose in a bad year Control Scores – how good are the controls I have in place PROCESSES & METRICS Loss data collection Indicator data collection Control self- assessment Risk assessment and analysis data Issue log data Follow up action reports MANAGEMENT Awareness of real exposures Knowledge of controls quality Cost benefit analysis Improved risk mitigation and transfer strategy Incentive system Management & Control Quality Economic Profit Effectively managing risk requires a foundation designed to turn raw data into information that supports managerial decision making

All Risk Mangements Standards - although using a different language - have some elements in common Establish Environment and Infrastructure