2012 Registration document and annual financial report - BNP Paribas

2CORPORATEGOVERNANCEReport of the Chairman of the Board of Directors on the manner of preparation and organisationof the work of the Board and on the internal control procedures implemented by the c ompany2In 2012, the ICCC addressed the following issues:■ the update of the Internal Control Charter with clarification on the“second set of controls” principle, the escalation process, the duty toraise concerns, and the independence of the control functions;■ the Group’s policy on penalties for misconduct by employees;■ the Group’s policy on anti-corruption;■ the Group’s policy on handl ing client complaints;■ the follow-up of recommendations from periodic control and regulators.PROCEDURESChecking procedures is one of the key tasks of the permanent controlsystem, alongside identifying and assessing risks, running controls,verifying reporting processes and overseeing the monitoring system.Written guidelines are distributed throughout the Group and providethe basic framework for the Group’s internal control, setting out theorganisational structures, procedures and controls to be applied. TheCompliance f unction, at headquarters level, and in the context of thesupervision of the permanent operational control system, checks thatprocedural guidelines are regularly monitored for completeness. Effortsare continuing to streamline the set of procedures and the applicablestandards, improve their distribution and planning, make them moreaccessible and design better tools for storing them, both at the levelof cross-function al procedures and procedures for operational entities(level-3 procedures).The Group’s cross-functional guidelines (levels 1 and 2) are updated aspart of an ongoing process in which all the core businesses and functionsactively participate. As regards the organisation of controls, the twiceyearlysurveys on the effectiveness of processes have been integratedinto the twice-yearly reporting on the permanent control.Among the Group’s cross-functional procedures, applicable in all entities,the following are especially important in terms of controlling risks:■ procedures dealing with the validation of exceptional transactions,new products and new activities;■ the procedure for the approval of day-to-day credit and markettransactions.These processes essentially rely on committees (exceptional transactions,new activities and new products committees, credit committees, etc.)principally comprising operational staff and permanent control functions(Risk Management and Compliance, as well as Finance, Legal and otherfunctions involved) who exercise a “second set of controls” control oftransactions. In the event of a disagreement, it is referred to a higher levelin the organisation. At the top of the process are the Committees (CreditCommittee, Capital Market Risk Committee and Risk Policy Committee) onwhich members of Executive Management sit. In addition, since the endof 2008, a monthly Risk Committee has met, comprising all the membersof Executive Management, as well as, in particular, the Heads of GroupRisk Management (GRM) and Finance f unctions, so as to ensure morefrequent monitoring of trends in Group risks.HIGHLIGHTS OF 2012Group ComplianceThe structure of the Compliance f unction remained stable in 2012. Slightchanges were made to the distribution of certain responsibilities withinits central unit, Group Compliance, in order to reflect the operationalorganisation of the Group in the Divisions and Retail unit defined at theend of 2011.In 2012, the following key actions were taken as a result of the Compliancef unction’s work:■ The corpus of Group standards was supplemented by several importantdocuments setting out the Group’s rules and standards on the handlingof client complaints, the rules relating to the proper use of electronicmessaging, organisation of relations with the French ombudsman inthe area of prevention of discrimination and the promotion of equality.■ Governance in the area of Group Financial Security and Protection ofthe i nterests of the clients was further strengthened, particularly bythe introduction of a more comprehensive set of business monitoringindicators.Among the improvements made to the corpus of Group standards,additions were made to the Financial Security generic control planapplicable to the Group’s entities.With the help of experts, initiatives and training on the prevention ofmoney laundering and the financing of terrorism, compliance withembargos and protection of client s’ interests continued and werestrengthened throughout the Group.■ The year 2012 was marked by the creation of a Group ProfessionalEthics Committee, whose main objective is to strengthen thesupervision provided by the Group Compliance f unction in the area ofp rofessional e thics. The object is to improve the effectiveness of themechanisms in the development of compliance plans and ensuringthat they are effectively monitored.■ In the area of market integrity, the market abuse preventionmechanisms have been strengthened and the new regulatoryobligations, particularly in the area of short selling, have beenimplemented.Permanent operational controlThe Group’s permanent control and operational risk managementsystem is underpinned by two key principles: strong accountability ofoperational staff for risk management and second-level control overrisk management by independent functions. Several significant steps areworthy of particular mention:■ Particular attention has been paid to the successful deploymentof the various initiatives launched in previous years with a view tobetter defining the responsibilities of first and second-level control,whether in terms of permanent control and operational risk, fraud andcorruption prevention and protection, or the management of businesscontinuity.■ Awareness campaigns and training for employees on operationalrisks, and more specifically, on the risks of fraud and corruption, havebeen developed, and the offer of training and the online publicationof awareness modules have been extended.662012 Registration document and annual financial report - BNP PARIBAS