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JP Morgan’s Integrated Risk Management Approach with Ashley Bacon

JP Morgan’s Integrated Risk Management Approach consists of four foundational elements. Starting with the Governance Structure, an essential part of the risk-literate culture and the enterprise-wide risk management approach, JP Morgan provides the appropriate structure in order to facilitate transparency, LOB ownership of risk and individual accountability over all organizational levels. The Senior management’s commitment, well-defined policies, practices, procedures and controls are required for a successful governance structure and therefore a flexible governance so that responses to dynamic markets are made fast. With Ashley Bacon, JP Morgan has a dedicated Chief Risk Officer who can focus on a variety of risk management aspects, such as risk identification, exposure quantification, reporting, response and remediation. By using a Chief Risk Officer, JP Morgan can ensure LOBs to do business in the right way and respect the impact of regulations. The risk manager typically provides context and information to support the decision–making, where the role of compliance is more consultative and collaborative rather than policing. This governance structure strengths cross-functional communication in order to holistically view a business’ risk profile.

Continuing with Risk Identification, JP Morgan values self-assessment and reporting a lot. Self-assessment is key to risk identification and a comprehensive view of risk and provides transparency and issue-prioritization. Reports are organized by business, function, issue or control. Risk reporting allows the senior management to focus on priority issues and makes clear that the follow-through is effective.

Risk Response is the third part of the foundational elements, as it results out of controls combined with escalation methods. In order to mitigate tangible risks and comply with regulations like Sarbanes-Oxley (SOX) it is necessary to have thorough controls in place.

JP Morgan establishes standards which make it easier to define what the non-standard is. Because it gets very difficult to establish or maintain controls for nonstandard processes, approval protocols for exceptions are crucial. Scorecards are used to tangibly prevent complacency from setting into an automated environment.

Every process enables a more agile response when risks are reported proactively. Nevertheless, intangible risks build a challenge to implementing controls. A system of rapid threat identification and response is required due to of daily operational breakdowns.

Escalation is event-based, where the process depends on different intensities, but those escalations are not simply managed functionally, they are communicated to all relevant functions. A pragmatic approach to such escalations is focusing on key stakeholders and rapid responses.

The fourth and last part of the foundational elements is Risk Remediation. This process is as well proactive and iterative and concentrates on learning from past events. By introspection policies, procedures and controls are refined.

Taken together, JP Morgan’s risk management approach can be considered as proactive, highly disciplined and budget-oriented to foster performance. Ashley Bacon provides oversight of risk taking activities including different risks, such as credit, market, liquidity and operational risk.

https://www.jpmorgan.com/jpmpdf/1320605429582.pdf

https://www.jpmorganchase.com/corporate/investor-relations/document/39dbe849_operating_committee_biographies.pdf

https://www.jpmorganchase.com/corporate/About-JPMC/ab-op-committee-bio-abacon.htm

https://www.jpmorganchase.com/corporate/About-JPMC/ab-risk-committee.htm https://www.jpmorganchase.com/corporate/About-JPMC/ab-op-committee-bio-abacon.htm