OSFI.CorpGov

Question 1

What is a FRFI

Answer 1

Federally Regulated Financial Institution

Question 2

Define “corporate governance”

Answer 2

Is a set of relationships between a company’s management, its BoD, its shareholders and other stakeholders

Question 3

Describe OSFI’s corporate governance expectations

Answer 3

They are principles-based and recognize that a FRFI’s corporate governance practices may depend on its size, ownership structure, nature, scope and complexity of operations, strategy and risk profile

Question 4

Characteristics of good corporate governance

Answer 4

• Incentivizes good behaviour (i.e. advances company & shareholder interests)
• Enables monitoring of operations & performance

Question 5

Contrast roles: BoD vs Senior Management - general (2,2)

Answer 5

BoD: direction-setting, oversight of management

Senior Management: Implement BoD decisions, oversight of operations

Question 6

Role of corporate governance in OSFI’s supervision

Answer 6

OSFI relies on good Corporate governance to support its supervisory role

OSFI requires BoD involvement during interventions to determine best corrective actions

Question 7

Identify and describe the two items that should be included in the design of a Risk Appetite Framework

Answer 7

Risk Appetite Statement:
- Reflects the aggregate level and type of risk that the FRFI is willing to accept in order to achieve its business objectives.
- Should be forward looking
- Should consider normal and stressed scenarios
- Should aim within the FRFI’s risk capacity

Risk Limit, is the allocation of the FRFI’s risk appetite statement to:
- Specific risk categories
- Business unit or platform level
- LOBs or product level
- More granular levels, as appropriate

Question 8

Risk Appetite Statement: Qualitative & Quantitative measures within the risk appetite statement (4,1) that may be aggregated or disaggregated

Answer 8

Qualitative:
- Significant risks the FRFI wants to take and why
- Significant risks the FRFI wants to avoid and why
- Attitude towards regulatory compliance
- Underlying assumptions & risks

Quantitative:
- Measures of loss or negative events that the FRFI is willing to accept

Question 9

Once BoD approves, who implements risk appetite framework?

Answer 9

Senior Management

Question 10

How is compliance within risk appetite framework ensured? (3)

Answer 10

CRO: ensures risk limits are consistent with FRFI’s risk appetite statement

CRO provides regular reports to BoD, Senior Management assessing risk limits and risk appetite statement

Internal auditor: routinely ensures compliance with risk appetite framework on an entreprise wide basis and in its review of units within the FRFI