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HOW WE OPERATE RESPONSIBLE BANKING WORKPLACE ENVIRONMENT COMMUNITY GOVERNANCE


G4-14


Risk Management WHY IT’S MATERIAL TO TD


Everyone at TD has a role to play in risk management. It’s essential that we each play our part to protect our business, our customers and our employees from a variety of risks in the financial services sector. These include traditional financial risks inherent to banking, such as credit and interest rate risk, as well as modern-day risks such as climate change and cybersecurity threats.


Management Approach


One of TD’s Guiding Principles is to take only risks that we understand and can manage. TD executives, Directors and employees look to both our Enterprise Risk Framework and our Risk Appetite Statement for a common understanding of how we manage risk.


The Bank also employs a “three lines of defence” model to describe the role of business segments (First Line), governance, risk, and oversight functions, such as Risk Management and Legal and Regulatory Compliance functions (Second Line), and Internal Audit (Third Line) in managing risk across TD. We regularly monitor and report on risk levels and compliance within TD’s risk appetite to senior management, the Board and its committees. We also run education sessions, communication programs and internal risk-management conferences to increase awareness across the organization.


TD’s Risk Appetite Statement We take risks required to build our business, but only if those risks:


1. Fit our business strategy and can be understood and managed


2. Do not expose the enterprise to any significant single-loss events (we don’t “bet the bank” on any single acquisition, business or product)


3. Do not risk harming the TD brand Managing Environmental Risk


Environmental risk is the possibility of loss of strategic, financial, operational or reputational value resulting from the impact of environmental issues or concerns and related social risk within the scope of short-term and long-term cycles. Management of environmental risk is an enterprise-wide priority. Key environmental risks include:


• Direct risks: Risks associated with the ownership and operation of the Bank’s business, which include management and operation of company-owned or managed real estate, fleet, business operations, and associated services


• Indirect risks: Risks associated with the environmental performance or environmental events, such as changing climate patterns that may impact the Bank’s retail customers and clients to whom TD provides financing or in which TD invests


• Risk arising from the changing regulatory environment: Including identification and management of new or emerging environmental regulatory issues


• Risk of opportunity loss: Failure to understand and appropriately leverage environment- related trends to meet customer and consumer demands for products and services


Go Deeper Managing Risk – Annual Report page 66


Update from the Risk Committee – Proxy Circular page 22


Page 59


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During incidents that could disrupt the bank’s business and operations, Business Continuity Management supports the ability of senior management to continue to manage and operate their businesses, and provide customers access to products and services. The bank’s robust enterprise- wide business continuity management program leverages a multi-tiered, global crisis/incident management governance structure to ensure effective oversight, ownership, and management of crises and incidents affecting the bank. All areas of the bank are required to maintain and regularly test business continuity plans designed to respond to a broad range of potential scenarios.


2015 Performance


• Continued enhancement of the enterprise and business segments’ Risk Appetite Statement, associated measures and reporting


• Continued focus on supporting risk culture with participation in a Canadian bank risk culture survey and completion of internal assessments of TD’s risk culture


• Presentations and discussions on emerging risks and issues of specific relevance


• Independent third-party assessment conducted as part of the assessment of the effectiveness of the Risk Management function


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