Enterprise Risk Management at ABN AMRO
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Case Details:
Case Code : ERMT-023
Case Length : 19 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : ABN AMRO
Industry : Banking
Countries : Global
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Excerpts
Risk Governance
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The Managing Board established the risk philosophy and policies for ABN AMRO
under the guidance of the Supervisory Board. Responsibility for the overall
implementation of risk policy lay with the Chief Financial Officer, who was a
member of the Managing Board.
Risk was managed through two principal departments: Group Risk Management (GRM)
and Group Asset and Liability Management (GALM). GRM was responsible for the
management of credit, country, market and operational risks and was also
responsible for leading the assessment of the impact of the New Capital Accord
(Basel II) and its implementation...
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Credit Risk
Credit risk was inherent in ABN Amro's business. All commercial activities,
which committed the bank, to engage in transactions involving credit risk,
required prior approval by authorized individuals or committees. The Managing
Board delegated approval authority to GRM and further down to the SBUs. Decision
authority was based on Global One Obligor Exposure (GOOE), which combined all
direct and contingent credit limits to a given relationship globally, and the
Uniform Counterparty Rating system (UCR), which was the risk rating of the
individual counterparty...
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Market Risk
Market risk was the possibility of movements in financial markets changing the
value of the bank's trading portfolios. Market risk arose from the bank trading
on behalf of clients and on its own account.
In trading activities, risk arose both from open (unhedged) positions and from
imperfect correlations between market positions that were intended to offset one
another. ABN AMRO measured and monitored different market risk factors such as
interest rate sensitivity, open currency position, stock prices, spread
sensitivities, greeks (delta, gamma, vega, rho)... |
Operational Risk
ABN Amro defined operational risk as the risk of loss resulting from inadequate
or failed internal processes, human behavior and systems or from external
events. This definition captured events such as IT problems, shortcomings in the
organizational structure, lapses in internal controls, human error, fraud, and
external threats. ABN Amro had established a dedicated Operational Risk
Management (ORM) discipline in 2000 to manage operational risks...
Exhibits
Exhibit I: ABN AMRO Business Principles
Exhibit II: ABN AMRO Key Results
Exhibit III: ABN AMRO Risk Governance Organizational
Exhibit IV: ABN AMRO Consumer & Commercial Clients
Exhibit V: ABN AMRO Wholesale Clients
Exhibit VI: ABN AMRO Private Clients & Asset Management
Exhibit VII: ABN AMRO Total Net Loans with 2002 SBU Breakdown
Exhibit VIII: ABN AMRO C&CC - Total Private Loans for 2002
Exhibit IX: ABN AMRO Net Additions to Specific Provisions per SBU &
Non-performing Loans
Exhibit X: ABN AMRO Cross-border Exposures
Exhibit XI: ABN AMRO VAR for Trading Portfolios
Exhibit XII: ABN AMRO Financial Highlights (Euro)
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