David X Martin January 30, 2014

The Company, a global financial institution has been doing business in Hong Kong for 50 plus years and has a 30% market share earning approximately $200MM per annum in HK which accounted for less than 3% of the total earnings of the Company. The British are about to hand over the governance to China. Senior management dispatched it's senior strategist to China/ HK who determined that there would be a non violent takeover, human rights would be restricted, commercial law would probably not be initially changed and the HK Dollar would remain--tied to the US Dollar. The CEO reports to the Board that he is monitoring the situation in Hong Kong CASE # 1 RISK APPETITE

The new CRO of one of the biggest large cap value/growth managers suggests to the CEO and Board that a position limit be placed on the percent owned of any company. The growth portfolio manager feels the positions are very liquid and he has never had a problem in liquidating a position. The value portfolio manager feels that we should invest money on behalf of our clients using our best ideas and a limit would prohibit certain clients from benefiting from them. The CEO sides with the portfolio manager and this issue comes to the Board for resolution. CASE # 2 RISK GOVERNANCE

A Latin American Sovereign government requires mandatory participation in a retirement plan. There a four local banks that compete for this business. Most participants chose their Bank based on returns. You are a Board member of the Bank and notice that to be competitive larger and larger riskier positions are being added in the investment subsidiary. The CEO comes to the Board and lays out his strategy to aggressively grow market share with a large, new marketing campaign focused on "peace of mind" CASE # 3 RISK MANAGEMENT AS A STRATEGIC ADVANTAGE

You company seems to get tagged every time there is some dislocation in the marketplace. Senior management feels the reason is that the company is big and is in most markets. The auditors feel the controls are reasonable. The senior management appears to be good and there has been very little turnover. The risk staff produces highly technical reports that indicate the company is taking acceptable risks, The CEO assures the Board that he and the CRO are on top of the situation and there is nothing to be concerned about. The Board is not comfortable that all risks are covered. What are the right questions to ask? What should the CEO and CRO be asked to do to get the Board comfortable? What should the ongoing risk presentation to the Board contain and what should be discussed? How can we make this not BORING??? CASE # 4 EMERGING RISKS Board Discussion