Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA) Presentation to the Federal Reserve Bank of Chicago August 14, 2007
Table of Contents 1 Introduction 2 Program Update 3 Appendix A: Emerging Risk Task Force 4 Appendix B: ERM Dashboards (Weekly and Monthly) 2
Business in Transition n The proposed sale of the La. Salle Bank Corporation (“LBC”, in conjunction with a proposed merger or sale of the remaining ABN AMRO group, announced in April 2007) has changed our risk state from “business as usual” to “business in transition. ” The change in risk state led to a heightened level of uncertainty. However, the future of LBC became more clear on July 13, 2007, when the Dutch Supreme Court ruled that the sale of LBC to Bank of America can proceed without shareholder approval. This ruling overturned the previous Enterprise Chamber Court ruling in May 2007. Barclays / Bank of America (“Bo. A”) July 13, 2007 September, 2007 March 31, 2008 December 31, 2007 Supreme Court Decision Barclays transaction expected to close Bo. A TRANSITION PERIOD RA TI V E Bo. A transaction expected to close Shareholder vote (Barclays vs. Consortium) 2009 / 2010 Bo. A INTEGRATION PERIOD BARCLAYS INTEGRATION PERIOD July 13, 2007 September, 2007 March 31, 2008 IL Royal Bank of Scotland (“RBS”) / Consortium LU ST BARCLAYS TRANSITION PERIOD Supreme Court Decision 2009 / 2010 Consortium transaction expected to close Shareholder vote (Barclays vs. Consortium) RBS / CONSORTIUM TRANSITION PERIOD RBS / CONS. INTEGRATION PERIOD 3
Business in Transition n Uncertainty still remains for the Business Unit North America ex-LBC (BUNA ex-LBC). The future for BU NA ex-LBC is expected to become more clear after the shareholder vote planned for September 20, 2007. § As a result of the uncertainty across all of BU NA, an Emerging Risk Task Force was formed in May to identify new risks or heightened risks (“emerging risks”). § The Task Force played a role during the pre-transition period by assembling a crossfunctional team to re-evaluate enterprise-wide risks. n For our ERM Program, this “business in transition” state has resulted in a change in prioritization of projects as well as change in focus to “emerging risks. ” 4
Table of Contents 1 Introduction 2 Program Update 3 Appendix A: Emerging Risk Task Force 4 Appendix B: ERM Dashboards (Weekly and Monthly) 5
ERM Vision and Program Objective ABN AMRO ERM VISION “To timely identify, manage and report all material risks in an integrated manner to enable optimal informed and efficient decision D TE A making, resulting in increased enterprise value. ” PD U Program Objective: “Getting the right information, to the right people, at the right time, to make the right decisions. ” This will be accomplished by: § Understanding the decisions we must inform § Providing the information necessary to inform each decision via integrated, concise, and relevant communication of risk information § Defining and establishing the components and interactions necessary to ensure that this information is collected, aggregated, analyzed, and delivered in a timely and quality manner to decision makers. 6
ERM Projects - 2007 Q 1 2007 • January Communication from Norm Bobins regarding adherence to Bank policies and Standards of Conduct, and prompt escalation of security, compliance and risk issues • February – ERM Program Plan, Organizational Structure (new ERM Committee), Risk Outlook Process and second ERM Dashboard approved and endorsed by NA RMC. • March – ERM Committee Charter approved in principle; Standards of Conduct updated to include Risk Issue Escalation and Risk Incident Reporting sections. Q 2 2007 • April – inaugural ERM Committee meeting. Preliminary findings and recommendations from Risk Independence Review presented to RMC. • May – Emerging Risk Task Force formed. List of emerging risks developed and “top questions” presented to RMC. • June – Emerging Risk questionnaire developed and interviews of senior management completed. “Creating a No Surprises Culture” communication from Robert Moore and Terry Bulger sent to all North American bank employees. Q 3 2007 Q 4 2007 Management Information: Enterprise-wide Stress Test Communications: “Everyone is a Risk Manager” Management Information: ERM Dashboard (weekly and monthly updates) Risk Oversight and Independence: Emerging Risk Task Force Support for Transition Team Model Governance Review Strategic and Alignment: Risk Appetite ED N AN L P 7
Table of Contents 1 Introduction 2 Program Update 3 Appendix A: Emerging Risk Task Force 4 Appendix B: ERM Dashboards (Weekly and Monthly) 8
Overview § In May 2007, at the request of the RMC and the ERM Committee, the Emerging Risk Task Force was formed to respond to the changing risk state from “business as usual” to “business in transition. ” § Emerging Risks are defined as those risks which are new to the organization or are heightened due to our changed risk state. § The Emerging Risk Task Force is led by Group Audit with representation from Finance, Compliance, Legal, HR, Group Security, ERM PMO, Operational Risk Management and Technology Risk Management. § The objective for the Emerging Risk Task Force is to help management identify and report to the RMC on the new and increasing risks to our organization. § At this time, no previously unidentified risks were noted. However, as the transaction unfolds, the task force expects the potential for risk to increase. § This high-level risk identification process is a continuation of the “Top Risk” process started earlier this year by the ERM PMO. § This process will continue to evolve as more clarity is provided around the expected transaction. 9
Common Emerging Risk Themes § Personnel Most commonly cited concern was accelerated loss of key personnel and the inability to replace them. Implications noted were inability to meet service and financial performance goals. § Operations Common theme is that quality of controls will decline due to loss of qualified staff and/or existing staff distracted by merger news. Capacity and flexibility to handle change, recover from problems, and maintain security will be diminished. § Customers Concerns were loss of customers and difficulty in attracting new clients (or expanding existing relationships) due to going concern issues. Customer losses increasing due to departure of relationship managers and poaching by competitors. 10
Emerging Risks Sweitser Report owner: Mc. Nally At the request of the RMC, a task force was created to identify emerging risks related to the current merger activities. Personnel were assigned representing all BU NA business units. Task force members interviewed RMC members and their direct reports to identify emerging risks. These tables summarize the significant task force findings. Recommendation: RMC members review the emerging risks identified, consider if applicable to their respective business units, and report on mitigating actions that need to be taken. 11 D R A F T FOR DISCUSSION PURPOSES
Emerging Risks 12 D R A F T FOR DISCUSSION PURPOSES Sweitser Report owner: Mc. Nally
Table of Contents 1 Introduction 2 Program Update 3 Appendix A: Emerging Risk Task Force 4 Appendix B: ERM Dashboards (Weekly and Monthly) 13
ERM – Flow of Management Information Level of Detail “Top 5” Risk Issues Emerging Risk Issues Weekly ERM Dashboard Monthly ERM Dashboard Line of Business and Functional Reporting Packages 14
ERM Dashboard § The ERM Dashboard was created to represent a holistic view of all risks across the enterprise and to increase transparency of risk for BU NA. § As seen on the previous slide, there were numerous line of business and functional reporting packages. However, prior to the creation of the ERM Dashboard, BU NA did not have a consolidated risk reporting package. This issue was also highlighted by the Federal Reserve earlier this year. The ERM Dashboard fills this gap and meets with regulatory requirements. § In constructing the ERM Dashboard, BU NA’s Enterprise Risk Reporting team utilized a “hub and spoke” structure to leverage existing risk reports while centralizing enterprisewide risk issues into a consistent reporting template. § This risk reporting framework is expected to support the governing committees as it balances decision making between business and risk. § BU NA’s Dashboard was also used as a template for creation of a Group Dashboard. 15
ERM Dashboard § The ERM Dashboard has been in production since February 2007. The dashboard was originally produced as a monthly report. However, due to more frequent risk information requests (regulatory), our Enterprise Risk Reporting team has started to produce a few key metrics on a weekly basis (e. g. Human Capital, Loan Pipeline and Liquidity). § The content of the report is fact-based, identifying risks assessed by functions across BU NA, such as: § Credit Risk, Operational Risk, Market Risk, Interest Rate Risk, Liquidity Risk, Business Risk, Reputational Risk, Strategic Risk, Capital Management Group, Compliance, Human Resources, Information Technology, Legal, Sarbanes-Oxley, and Internal Audit. § On the top right of each page, an RMC member is listed to denote responsibility for delivering fact-based risk data and to establish accountability, highlighting “de facto” risk owners. 16
Risk Management North America Weekly Enterprise Risk Management Dashboard August 8, 2007 17 D R A F T FOR DISCUSSION PURPOSES
Dashboard Summary Market Developments Commercial Banking Indicators • Rates rise Monday, as stocks rally and investors lower demand for government debt. • Commercial loans are down (1. 1%) and DDA balances are down (15. 4%) the last 45 days. • Com’l balances down in all portfolios except Financial Institutions and NA Sectors in the last 45 days. Pipeline • New approvals totaled $325 mln the week ending 8/4; the two lowest annual “new” weekly approval volumes have occurred in the last 45 days. DDA Volume • Volume of DDA accounts closed continues to exceed new accounts opened. • Services grouping looking to exclude escrow accounts which might be diluting the Com’l activity. Human Capital • Voluntary resignations still comparable to one year ago at Jul-07 YTD (191 Jul-07 YTD vs. 194 Jul-06 YTD). • 27 retention group employees (up 4 from last week) and 20 SVP+ (up 1 from last week) have resigned since June 15 th. Liquidity Risk • Policy level for LBC’s Liquid Assets/Volatile funding ratio was decreased LBC now within limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30. 18 D R A F T FOR DISCUSSION PURPOSES
Weimer Market Developments Report owner: Caldwell Rates rise Monday, as stocks rally and investors lower demand for government debt Swap Rates Unsecured Credit Spreads Secured Credit Spreads 10 -Yr Swap v. 2 -Yr Swap Volatility Oil & S&P Futures Commentary Sell / CLN 7 COMB Comdty (R) 69. 10 Buy / SPU 7 Index (L) 1560. 10 19 D R A F T FOR DISCUSSION PURPOSES Following a week of market fluctuation, treasury prices tumbled the most since July on Monday, as the strongest U. S. stock rally in four years reduced investor demand for lower-risk government debt. The benchmark 10 -year U. S. treasury note ended the week at 4. 686%, climbing back to 4. 739% by the end of the trading day Monday. Yields rose further on speculation that regulatory restraints for Fannie Mae and Freddie Mac may ease. Treasuries had advanced for four straight weeks on concern that a continued fallout in the housing market may result in widespread weakness throughout the economy. Last week’s labor indicators strengthened treasury gains, as Nonfarm Payrolls increased 92, 000 in the month of July, down from 126, 000 in the month of June. Meanwhile, the Unemployment rate increased to 4. 6% from 4. 5% in the previous month.
Holmes Commercial Banking Indicators Report owner: Connolly Commercial loans are down (1. 1%) and DDA balances are down (15. 4%) the last 45 days • Commercial loan volume (excluding MFG & CMBS) is up $3. 1 bln compared to one year ago. Primary growth realized in NA Sectors ($1. 1 bln), CRE ($677 mln) and RECM ($511 mln). • Commercial deposits are down $609 mln from a year ago due; deposits down in all business lines with exception of NA Sectors (up $19 mln) and RECM (up $2 mln). • Com’l balances down in all portfolios except Financial Institutions and NA Sectors in the last 45 days. Source: Finance Mgmt. Reporting 20 D R A F T FOR DISCUSSION PURPOSES
Bulger Report owner: Daw Eagle Pipeline New LCP activity has been below 12 month average over the last 45 days, loans outstanding are down 4. 1% Jul-YTD New & Renewal Volume Trend* BU NA Loans Outstanding* $99. 97 bln, down 4. 1% Jul-YTD Last 45 Days: $584 mln “new” approved on avg. New 12 month avg. = $819 mln *Graph excludes 1 Q 07 NAT RES sale *Committee & Signature Authority Approvals Commercial Unfunded Approvals Aging *Committee & Signature Authority Approvals • New approval volume has averaged $819 mln the last 12 months but averaged $584 mln per week the last 45 days. • New approvals totaled $325 mln the week ending 8/4; the two lowest annual “new” weekly approval volumes have occurred in the last 45 days. • Loans outstanding are down 4. 1% to $99. 97 bln Jul. YTD; loans declined in July due to CMBS securitization. • Approximately 44. 7% of “new” exposure approved in March & April have funded. 21 D R A F T FOR DISCUSSION PURPOSES
Rosenthal DDA Open & Closed Account Activity Report owner: Flom/Gialamas Report includes all DDA accounts opened and closed in 2007 Total - DDA New/Closed Commercial - DDA New/Closed • Net change in Retail can be attributable to several factors including: Retail - DDA New/Closed Ø Account openings tend to peak in the summer months – especially when a promotion is being offered Ø During the early months of ’ 07 several of our competitors may have had promotional offerings – we did not Ø In a rising rate environment, people tend to move money toward savings and CDs • Services group looking to exclude escrow accounts which might be diluting the Commercial activity. 22 D R A F T FOR DISCUSSION PURPOSES
Van. Der. Werff Report owner: Kaiser Human Capital Total BU NA headcount of 13, 465 down from 18, 444 at YE 06 BU NA Turnover Voluntary Turnover BU NA Turnover by Group (Aug-YTD) • Due to the current state, we can expect to see voluntary resignations increase within the next month. • Some small but critical increases in voluntary resignations, e. g. retention group departures in Compliance, Finance and PFS (Wealth Mgmt), as well as resignations in revenue generating roles in Commercial, Global Markets and GSTS. • Attrition is a lagging indicator - from the time an employee acts to leave (beings interviewing) through his/her departure from payroll can be from weeks to months. *Total Headcount as of 1/30/07 23 D R A F T FOR DISCUSSION PURPOSES
Moore Liquidity Risk Limit breach at 6/30; waived by BU NA and Group ALCOs 24 D R A F T FOR DISCUSSION PURPOSES Report owner: Ide/Steffen
Risk Management North America Enterprise Risk Management Dashboard August 2007 25 D R A F T FOR DISCUSSION PURPOSES
Changes from Last Month Group Audit and Risk are identifying and monitoring emerging risks related to the current merger activities. Significant observations as a result of interviewing Management from across BU NA business units have been identified. MED Business Risk • Volatile credit markets resulted in minimal July profits with Global Markets and Com’l Real Estate being the most affected. • Direct sub-prime exposure is small, however our indirect exposure as a lender is significant (American Home exposure – now in bankruptcy). • Need to address BUNAELS (BU NA ex-La. Salle) disentanglement issues (payroll, tax, etc. ) HIGH Risk Appetite CMBS securitization resulted in a decline in loans outstanding in July. Cash flow funded exposure within $2. 7 bln limit at Jul-07 and Supervisory LTV within limit at 2 Q 07. LOW Market Risk Global STCG (Strategic Credit Trading Group) experienced substantial losses at which 80% was allocated to Global Markets NA. MED Policy level for LBC’s Liquid Assets/Volatile funding ratio was decreased, LBC now within limit. Other limit breaches waived by BU NA and Group ALCOs and are expected to be back into limit by September 30. LOW Investment Risk Market conditions have not been favorable as higher levels of volatility hurt mortgagebacked securities positions and some dealers are selling MBS to raise cash to shore up other positions. MED Human Capital New measure for mid-year reviews indicated strong completion rates. New measure for critical positions with replacements indicates strong readiness in the event of losing critical position incumbents. LOW Complex Products – monitoring impact of industry change on market value swaps MED Emerging Risks Liquidity Risk Legal 26 D R A F T FOR DISCUSSION PURPOSES
Changes from Last Month Reputation Virus/Electronic Theft – Increasing expertise of hackers and use of web-based viruses to enable account access and theft puts entire industry at risk. Reputation risk increases if customers determine online banking insufficiently secure. MED Finance/SOX IT SOX issues greater than 18 months improved to 3 issues from 26 issues last month. LOW Audit Transaction Banking risk level increased from low to moderate as there have been two less than satisfactory audit reports in the last three months. MED 27 D R A F T FOR DISCUSSION PURPOSES
Bulger/Killips ERM Dashboard Key Risk Indicators Report owner: Daw Common Emerging Risk Themes • Personnel Most commonly cited concern was accelerated loss of key personnel and the inability to replace them. Implications noted were inability to meet service and financial performance goals. • Operations Common theme is that quality of controls will decline due to loss of qualified staff and/or existing staff distracted by merger news. Capacity and flexibility to handle change, recover from problems, and maintain security will be diminished. BU NA* Key Performance Indicators • Customers Concerns were loss of customers and difficulty in attracting new clients (or expanding existing relationships) due to going concern issues. Customer losses increasing due to departure of relationship managers and poaching by competitors. NOTE: 2007 Target adjusted for reclassification of Mortgage gain to Disc. Ops. Full year Forecast adjusted for impact of World. Com settlement, unanticipated GM severance and bonus payouts for 2006, and retention Revenue growth excludes 2006 Talman Settlement Full Year Forecast 2007 and Target exclude TEA Forecast 2007 includes Jun-YTD Actuals and Jul-Dec Forecast *excludes Global Clients 28 D R A F T FOR DISCUSSION PURPOSES
Moore Strategic Business Review Report owner: Gehring Metrics are in place to monitor any potential increased risk in the organization due to SBR initiatives. To date, there has not been a significant decline in any of the key metrics. 29 D R A F T FOR DISCUSSION PURPOSES
Emerging Risks Sweitser Report owner: Mc. Nally Group Audit and Risk are identifying and monitoring emerging risks related to the current merger activities. As a result of interviewing Management from various BU NA business units, the following significant observations were identified: • Lack of clarity around AANA organization could cause process and control weaknesses in AANA post legal day 1. • Concerns noted that some business-as-usual activities that continue to occur may lack relevance (e. g. , budget adjustments for 2007, RSAs, special projects that may or may not be sustainable post-split) and take focus away from the transition. • Key resources may be over-stretched for transition activities. Talented resources are being pulled into transition activities, leaving a lack of focus over business-as-usual activities. Uncertainty continues to impact morale. • Significant tax implications exist from the unwinding of entities staying and going. • Uncertainty regarding Bank of America’s views on relationship banking. Concerns were noted regarding the ability of the Bank to service clients as they do today and the retention of relationship management teams. 30 D R A F T FOR DISCUSSION PURPOSES
Business Risk 31 D R A F T FOR DISCUSSION PURPOSES Moore Report owner: Tannenbaum
Business Risk 32 D R A F T FOR DISCUSSION PURPOSES Moore Report owner: Tannenbaum
Bulger U. S. Default Surveillance Tool Kit* Report owner: Daw In July, the US distress ratio increased to 0. 9% from its all-time low of 0. 8% in June. One year ago the distress ratio was 3. 2%. Distress across sectors appears consistent in recent months. In the US, healthcare and retail/restaurant sectors displayed the highest propensity for distress. Unemployment rate, slope of yield curve, corporate profits, and Standard and Poor’s outlook distribution are inputs into the Standard and Poor’s U. S. speculative-grade default rate forecast model. Risks to the default rate reflect a one-year time horizon for all variables aside from the distress ratio, which reflects a nine-month time horizon. Source: Standard and Poor’s Global Fixed Income Research. *Published monthly Recommendation: Monitoring changes in economic, financial, and credit variables that go into the default surveillance tool kit offers a valuable insight into the default outlook. A rising distress ratio signals an increased need for capital and could act as a precursor to more defaults if accompanied by a credit crunch. 33 D R A F T FOR DISCUSSION PURPOSES
Next Stress Test: Oct-07 Bulger Stress Cases Report owner: Widuch Enterprise wide stress testing is in the developmental stage across the industry. The results below are an enterprise wide stress test for BU NA under 2007 EC methodology. Currently working on a worst case scenario based on merger. Economic capital under stress grows to $8. 5 bln, in excess of Tier I capital as well as BU NA’s Pf. C economic capital figure of $6. 3 bln. The $2. 1 bln excess is significant, but is overstated in that it can be assumed management would intervene via risk/capital reduction activities (CLOs, hedges, swaps, etc. ) and/or shrink the balance sheet to manage this figure. Recommendation: Further conform modeling methodologies and techniques, create documentation per PGRC formal stress testing policies, include conclusions/mitigation based on results, establish a formal oversight function and governance structure. 34 D R A F T FOR DISCUSSION PURPOSES
Bulger Risk Appetite Report owner: Daw Changes in the loan portfolio have been more volatile in 2007; CMBS securitization resulted in July decline BU NA Loans Outstanding – Trend & Change* BU NA Loans down 4. 1% form YE 06 Industry Clusters exceeding 6% of BU NA EC (May-07) Source: Essbase (LOB Mgmt cube) *Graph excludes NAT RES Sale BU NA Trading Risk Va. R Exposure Top 10 (Jul-07) EC by Risk Type ($000) – 2 Q 07 Recommendation: Continue to monitor Cash Flow portfolio and Supervisory LTV on a monthly basis. Cash Flow funded exposure within $2. 7 bln limit at Jul-07 and Supervisory within limit at 2 Q 07. Risk monitoring Eagle Pipeline statistics on a weekly basis. 35 D R A F T FOR DISCUSSION PURPOSES
Credit Risk Bulger Report owner: Daw “Investors alternately focus on concerns like sub-prime loans and rising energy prices and positives like low unemployment, low interest rates and still-growing corporate profits resulting in a turbulent stock market. ” NY Times Retail 90 DPD Trend First mtg. trend = post sale *Source: Goldman Sachs CDS Market Recap **KMV = change in EDF (Expected Default Factor) Non-Retail Upgrade – Downgrade Trend by Quarter EL/EAD Trend Recommendation: Continue to monitor upgrades and downgrades closely, on a monthly basis. Upgrades have outpaced downgrades in the Commercial portfolio in 2007 as last year credit quality was satisfactory. The improved performance has been picked up by MRA and has resulted in better risk ratings. Majority of upgrades in 1 to 2 notch category which is inline with stable economic conditions. *source: markit. com 36 D R A F T FOR DISCUSSION PURPOSES
Credit Risk Bulger Report owner: Daw LBC and peer criticized/adj capital ratios both increasing slightly while the classified ratio is converging BU NA Criticized Exposure/Adj Capital BU NA Criticized Outstanding/Adj Capital *2007 includes Large Corporate. Non-Accrual outstandings used for nonaccrual exposure for Large Corporate. LBC Criticized Exposure/Adj Capital *2007 includes Large Corporate. LBC Classified Exposure/ Adj. Capital *Peer source OCC, peers are OCC Large Bank Program 37 D R A F T FOR DISCUSSION PURPOSES
Operational Risk 38 D R A F T FOR DISCUSSION PURPOSES Bulger Report owner: Wajda
Market Risk Bulger Report owner: Bakker North American Total Trading Va. R exposure (7/1 to 7/31) Recommendation: MRM NA is taking steps together with its colleagues across the globe to enhance the transparency of globally run trading books. 39 D R A F T FOR DISCUSSION PURPOSES
Interest Rate Risk Moore Report owner: Tannenbaum In compliance with all limits. Source: BU NA ALM Recommendation: Continue to monitor 40 D R A F T FOR DISCUSSION PURPOSES
Liquidity Risk Limit breach at 6/30; waived by BU NA and Group ALCOs Recommendation: Continue to monitor. 41 D R A F T FOR DISCUSSION PURPOSES Moore Report owner: Tannenbaum
Investment Portfolio Risk Moore Report owner: Tannenbaum Market conditions have not been favorable as higher levels of volatility hurt mortgage-backed securities positions (because we are short options) and some dealers are selling MBS to raise cash to shore up other positions. § Portfolio is fully invested (constrained by Risk Weighted Assets) § AMP (Actively Managed Portfolio) performance has been negatively impacted by year-to-date performance of mortgage securities. View is that mortgage assets will return to long-term performance expectations. * AMP less Funding results also include the Actively Managed Portion of the AABS portfolio starting in April Recommendation: Continue to monitor, currently compliant with all limits. 42 D R A F T FOR DISCUSSION PURPOSES
Capital Management Moore Report owner: Lentino • BU NA is pursing a strategy of using the CMG global capital clearinghouse capacity wherever possible to stay within its capital budget limits. Forecasting of RWA numbers continues to improve. BU NA RWA Trend Ro. ARC by Line of Business -Return on ARC figure for North America includes returns from Global Clients and Global - Actual, budget and forecast figures for RWA reflect BU NA on a standalone basis (i. e. excluding GM and GC) Markets segments in addition to BU NA. - Actual, budget and forecast figures are pro-forma to reflect the sale of AAMG Recommendation: BU NA should maintain a contingency plan of short-dated relief actions that can be quickly executed should clearinghouse capacity be unavailable in a given quarter. 43 D R A F T FOR DISCUSSION PURPOSES
Compliance Risk Biern Report owner: Moffitt Risk ratings presented below are based on net residual risks from the Compliance Risk Assessment Methodology (CORe). The above “Compliance Risk” row reports the highest risk rating carried upward from grid. Recommendation: Action plans have been developed to mitigate the high risks noted in the Compliance Risk Assessments. Compliance will be monitoring, tracking and reporting on the action plans. 44 D R A F T FOR DISCUSSION PURPOSES
Human Capital Risk Van. Der. Werff Report owner: S. Kaiser New measure for mid-year reviews indicates strong completion rates. New measure for Critical Positions with Replacements indicates strong readiness in the event of losing critical position incumbents. For Resignations, amber is coded for increase over July >. 5% or red for increase over July >1%. BU NA Human Investment Ratio has continued to decline from Q 1, indicating less return on total compensation spend (target is 2. 46, was achieved in March). Overall, resignation rates are running in line with last year and less than established industry benchmarks, indicating a stable organization. Recommendation: July is a critical month for attention to staff. Leaders are encouraged to reach out to ensure staff concerns are answered before staff resign. Ensure replacement planning is utilized actively managed by the business. ABN AMRO Confidential 45 This information is confidential and proprietary information and may not be disclosed by you to any third parties without prior written approval unless such information is otherwise made publicly available by ABN AMRO D R A F T FOR DISCUSSION PURPOSES
Human Capital Risk Van. Der. Werff Report owner: S. Kaiser Qualitative Commentary by HR Business Partners regarding critical staff resignations, including staff from Retention Group (June 12 through August 6, 2007). ABN AMRO Confidential 46 This information is confidential and proprietary information and may not be disclosed by you to any third parties without prior written approval unless such information is otherwise made publicly available by ABN AMRO D R A F T FOR DISCUSSION PURPOSES
Services 47 D R A F T FOR DISCUSSION PURPOSES Rosenthal Report owner: Flom
Legal Risk Rounsaville Report owner: Taylor Operation = risk of error/omission creating possible legal liability Regulatory = risk of investigation/fines/penalties Litigation = risk of suit by regulatory or third party Recommendation: 48 D R A F T FOR DISCUSSION PURPOSES
Rounsaville Reputation Risk Report owner: S. Gordy Issue Management working group (IMWG) is the BU NA tool for monitoring issues that could have a significant impact on firm’s reputation. Functions represented in working group include Legal, Privacy, Civic and Sustainable Development, Business Continuity, Human Resources, Marketing, Office of the President, Operational Risk, and Compliance. Additionally, others are queried regularly. 49 D R A F T FOR DISCUSSION PURPOSES
Finance/SOX Moore Report owner: Ingwersen The SOX heat map is a summary of individual internal control deficiencies, with regards to financial reporting, that aggregate to potential material issues that should be reviewed by management. 50 D R A F T FOR DISCUSSION PURPOSES
Audit 51 D R A F T FOR DISCUSSION PURPOSES Sweitser Report owner: Hyman
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