Bank of America 2015 Annual Report Download - page 50

48 Bank of America 2015
Our Risk Framework is the foundation for comprehensive
management of the risks facing the Corporation. The Risk
Framework sets forth clear roles, responsibilities and
accountability for the management of risk and provides a blueprint
for how the Board, through delegation of authority to committees
and executive officers, establishes risk appetite and associated
limits for our activities.
Executive management assesses, with Board oversight, the
risk-adjusted returns of each business. Management reviews and
approves the strategic and financial operating plans, as well as
the capital plan and risk appetite statement, and recommends
them annually to the Board for approval. Our strategic plan takes
into consideration return objectives and financial resources, which
must align with risk capacity and risk appetite. Management sets
financial objectives for each business by allocating capital and
setting a target for return on capital for each business. Capital
allocations and operating limits are regularly evaluated as part of
our overall governance processes as the businesses and the
economic environment in which we operate continue to evolve. For
more information regarding capital allocations, see Business
Segment Operations on page 30.
Our Risk Appetite Statement is intended to ensure that the
Corporation maintains an acceptable risk profile by providing a
common framework and a comparable set of measures for senior
management and the Board to clearly indicate the level of risk the
Corporation is willing to accept. Risk appetite is set at least
annually in conjunction with the strategic, capital and financial
operating plans to align risk appetite with the Corporation’s
strategy and financial resources. Our line of business strategies
and risk appetite are also similarly aligned. For a more detailed
discussion of our risk management activities, see the discussion
below and pages 51 through 98.
Our overall capacity to take risk is limited; therefore, we prioritize
the risks we take in order to maintain a strong and flexible financial
position so we can withstand challenging economic conditions and
take advantage of organic growth opportunities. Therefore, we set
objectives and targets for capital and liquidity that are intended
to permit the Corporation to continue to operate in a safe and
sound manner at all times, including during periods of stress.
Our lines of business operate with risk limits (which may include
credit, market and/or operational limits, as applicable) that are
based on the amount of capital, earnings or liquidity we are willing
to put at risk to achieve our strategic objectives and business
plans. Executive management is responsible for tracking and
reporting performance measurements as well as any exceptions
to guidelines or limits. The Board, and its committees when
appropriate, oversees financial performance, execution of the
strategic and financial operating plans, adherence to risk appetite
limits and the adequacy of internal controls.
Risk Management Governance
The Risk Framework describes delegations of authority whereby
the Board and its committees may delegate authority to
management-level committees or executive officers. Such
delegations may authorize certain decision-making and approval
functions, which may be evidenced in, for example, committee
charters, job descriptions, meeting minutes and resolutions.
The chart below illustrates the inter-relationship among the
Board, Board committees and management committees that have
the majority of risk oversight responsibilities for the Corporation.
This chart reflects the current Risk Framework as approved by the
Board in December 2015.
(1) This presentation does not include committees for other legal entities.
(2) Reports to the CEO and CFO with oversight by the Audit Committee.
Board of Directors and Board Committees
The Board, which consists of a substantial majority of independent
directors, authorizes management to maintain an effective Risk
Framework, and oversees compliance with safe and sound banking
practices. In addition, the Board or its committees conduct
appropriate inquiries of, and receive reports from management on
risk-related matters to determine whether there are scope or
resource limitations that impede the ability of independent risk
management and/or Corporate Audit to execute its
responsibilities. The following Board committees have the principal
responsibility for enterprise-wide oversight of our risk management
activities. These committees and other Board committees, as
applicable, regularly report to the Board on risk-related matters.
Through these activities, the Board and applicable committees are
provided with thorough information on the Corporation’s risk
profile, and challenge executive management to appropriately
address key risks facing the Corporation. Other Board committees
as described below provide additional oversight of specific risks.