BB&T 2015 Annual Report Download - page 69

TableofContents
The following chart depicts the three lines of defense model:
Risk
Committees
Board of Directors
Executive
Management
1st Line of Defense 2nd Line of Defense 3rd Line of Defense
Business Units Risk Functions Audit Services
Chief Risk Officer
The CRO leads the RMO, which designs, organizes and manages BB&T’s risk management framework. The RMO is responsible for ensuring effective risk
management oversight, measurement, monitoring, reporting and consistency. The CRO has direct access to the Board of Directors and Executive
Management. The CRO is responsible for identifying and communicating in a timely manner to the CEO and the Board of Directors meaningful risks and
significant instances when the RMO’s assessment of risk differs from that of a BU, significant instances when a BU is not adhering to the risk governance
framework, and BB&T’s risk profile in relation to its risk appetite on at least a quarterly basis. In the event that the CRO and CEO’s assessment of risk were to
differ or if the CEO were to not adhere to the risk management framework, the CRO would have the responsibility to report such matters to the Board of
Directors.
The Executive Management-led enterprise risk committees provide oversight of the first and second lines of defense and communicate risk appetite and
values to the RMO. The CRO and the enterprise risk committees approve policies, set risk limits and tolerances and monitor results.
The RMC, CRMC, ORMC, CROC and the MRLCC are the enterprise risk committees and provide oversight of the risks as described in the common risk
language. Executive Management members participate in all five committees.
The risk management framework is composed of specialized risk functions focused on specific types of risk. The MRLCC, CRMC, CROC and ORMC
provide oversight of market, liquidity, capital, credit, compliance, and operational risk while RMC provides a fully integrated view of all material risks across
the company. The RMC provides oversight of all risks and its purpose is to review BB&T’s aggregate risk exposure, evaluate risk appetite, and evaluate risks
not reviewed by other risk committees.
The RMC is responsible for taking a broad view of risk, incorporating information from all risk functions. This combination of broad and specific focus
provides the most effective framework for the management of risk. The RMC is chaired by the CRO and its membership includes all members of Executive
Management, the General Auditor (ex officio) and senior leaders from Financial Management, the RMO and other areas.
The principal types of inherent risk include compliance, credit, liquidity, market, operational, reputation and strategic risks.
Compliance risk
Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformance with
prescribed practices, internal policies and procedures or ethical standards. This risk exposes BB&T to fines, civil money penalties, payment of damages and
the voiding of contracts. Compliance risk can result in diminished reputation, reduced franchise or enterprise value, limited business opportunities and
lessened expansion potential.
Credit risk
Credit risk is the risk to current or anticipated earnings or capital arising from the default, inability or unwillingness of a borrower, obligor, or counterparty to
meet the terms of any financial obligation with BB&T or otherwise perform as agreed. Credit risk exists in all activities where success depends on the
performance of a borrower, obligor, or counterparty. Credit risk arises when BB&T funds are extended, committed, invested, or otherwise exposed through
actual or implied contractual agreements, whether on or off balance sheet. Credit risk also occurs when the credit quality of an issuer whose securities or other
instruments the bank holds deteriorates.
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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