1. Risk Management at Goldman Sachs Presentation to the Stanford Finance Forum David Viniar Chief Financial Officer June 3, 2011

2. GS Risk Management Strategy In the business of taking risks Balance our ability to profit from underwriting, market-making, lending and investing activities with our exposure to potential losses —Fully understand the risk; properly price and distribute it; limit down side —Maintain a liquid balance sheet and diversified business risks Key risk exposures —Market —Credit —Operational —Liquidity —Reputational Key elements of risk management —Sophisticated measurement, monitoring and reporting —Pro-active management and mitigation —Conservative capital, funding and liquidity risk management 1

3. GS Liquidity Risk Management Policies Excess liquidity Asset-liability management Prudent intercompany funding policies Continuing Liquidity Stress Testing and Crisis Planning 2

4. Excess Liquidity Pre-fund potential stressed cash and collateral needs during a crisis Comprised of cash and highly- liquid, unencumbered securities Can be sold or pledged to generate liquidity $168B 1Q11 average Debt maturities Disruptions to unsecured and secured financing flows Collateral outflows Draws on unfunded commitments Other contractual and contingent cash outflows “Global Core Excess”“Modeled Liquidity Outflow” 3

5. Funding 1Q11 Secured Funding: $213bn Deposits: $39bn Unsecured Short-Term: $54bn Unsecured Long-Term : $174bn 1 Does not include trades collateralized by GCE-eligible assets (i.e., “Governments” excludes GCE-eligible government securities). 2 WAM applies to U.S. and non-U.S. time deposits. 3 WAM excludes equity. WAM ~ 7yrs 3 WAM >100 days 1 WAM ~ 3yrs 2 4

6. 2008 Financial Crisis – Challenges to Balance Sheet and Risk Management Assets became less liquid Asset valuations were impaired More assets moved into Level 3 Bank loan origination inventory was elevated Counterparty credit issues multiplied Volatility spikes increased our risk metrics Liquidity left the firm Funding markets became dislocated —Capacity was reduced, repo haircuts widened —Counterparties were dislocated, funding cost ros e 5

7. Financial Crisis – Perception Became Reality… JPM acquired Bear Stearns Lehman Bankruptcy 6

8. 7 Response Became a Bank Holding Company Raised capital from Warren Buffet Generated material new funding and efficiencies Key Takeaways:  Liquidity risk management framework largely validated  Pro-active measures mitigated risk and yielded substantial new funding  Government intervention and programs helped stabilize financial markets

9. Reduced Key Risk Exposures 8 $43 $27 $22 $10 $8 $4 $16 $11 $10 $8 $5 $7 $19 $17 $15 $11 $8 $6 0 10 20 30 40 50 60 4Q071Q082Q083Q084Q083Q094Q09 $bn Lev Loans ResRE CRE

10. Reduced Assets and Leverage 9

11. Made Our Balance Sheet More Liquid CAGR Liquid = 24% Less Liquid = 39% CAGR Liquid = (17)% Less Liquid = (23)% 10

12. Grew our Excess Liquidity Average Global Core Excess ($bn) 166% Increase 11

13. Key Lessons Learned 1.Liquidity and funding are key to life 2.Be creative when identifying potential liquidity outflows 3.Adequate capital does not mean adequate liquidity 4.Size is important – of firms and of specific risk positions 5.“Tail risk” is problematic 6.Good risk management processes do not equal good risk managem ent 12