Enterprise Risk Management (ERM) ABN AMRO Business Unit North America (BU NA) Overview for ERM Committee April 11, 2007

2 Table of Contents Four stages of the ERM Process 2 ERM is all about integration 1 Characteristics and sources of effective KRIs 3 An ERM Dashboard should address 5 key questions 4 Hallmark of success in ERM 5

3  Risk factors – strategic, business, credit, market and operational  Oversight – governance, risk and compliance  Analytical models – data standards, modeling, assumptions, stressed scenarios  Information flows – risk vs. performance; internal vs. external  Business processes – strategic planning, M&A, product development, pricing, performance measurement ERM is all about integration Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

4 Four stages of the ERM process Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “ ERM Foundations Risk Identification & Assessment Risk Measurement and Reporting Risk Mitigation and Management Governance structure Resource allocation ERM Framework Risk policies Incentive systems Education & Training Top-down risk assessments Bottom-up risk assessments Audit reviews Independent assessments (regulators, consultants, customers) KRIs Performance vs. Standards Dashboard reporting (Management, Board) Public disclosure Resolution of issues Product & Customer Management Risk-adjusted pricing Investment, funding & capital strategies Risk transfer

5 Characteristics and sources of effective KRIs Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “ Business Plans Management Goals Performance Metrics Legal requirements Regulatory standards Policy limits Actual losses Incidents Industry data Investors Business Partners Other

6 1. Are any of our business objectives at risk? 2. Are we in compliance with policies and regulations? 3. What risk incidents have been escalated? 4. What KRIs and trends require immediate attention? 5. What risk assessments need to be reviewed? ERM Dashboard should address 5 key questions Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “

7  “Tone from the top” – engaged senior management and Board of Directors  Establishment of policies, systems and processes – supported by a strong risk culture  Clearly defined risk appetite with respect to risk limits and business boundaries  Robust risk analytics - summarized in an “ERM Dashboard” for executive and Board reporting  Risk-return management via integration of ERM into strategic planning, business processes, performance measurement and incentive compensation Hallmark of success in ERM Source: James Lam’s Presentation, “Emerging Best Practices for Enterprise Risk Management (ERM) in Financial Services “