La banque d'un monde qui change 2004 - BNP Paribas

2004 Review of OperationsThe BNP Paribas operational risk analysis and measurementmethodology is based on:1. Historical loss data derived from the Group-wide incidentreporting system;2. External data supplied by the ORX consortium of whichBNP Paribas is a founder member;3. A prospective approach based on key process identificationand scenario analyses;4. Environmental and internal control factors.Its implementation, supported by an integrated suite ofanalysis and management applications, will enable the Bankto determine its future needs in terms of both regulatory andeconomic capital to cover operational risk.The analyses of operational risks and the definition ofexposure measures is being conducted in close cooperationwith the divisions, business lines and territories and thevarious corporate functions involved (Information Systems,Human Resources, Legal and Tax Affairs and the differentcomponents of the Bank’s internal control structure).Legal Risk and Special RegulationsBNP Paribas is bound by regulations applicable to financialinstitutions in all countries where it does business, includingbanking, insurance and financial services regulations.The Bank is required to respect the integrity of the marketsand safeguard clients’ interests.Group Legal Affairs has established and regularly updatesan Internal Control system designed to anticipate, detect,measure and manage legal risks. In 2004, new structures wereset up and various reorganisation measures were implementedto improve coordination and avoid potential conflicts ofinterest among the control structures.The system, as upgraded in 2004, is organised around:• Specific Committees, including:- the Group Legal Affairs Committee, which is responsiblefor overseeing the activities of the Legal Affairs function;– the Legislation Tracking Committee, which analysesand distributes to all departments concerned the textsof new laws and regulations and details of changesin French case law;– the Global Legal Committee, which coordinatesthe activities of the legal function throughout the Groupand in all countries that have their own legal staff.• A Group Legal Coordination Department set up in 2004 toensure that the Group’s legal policies are consistentand to deal with cross-functional issues.• Internal procedures and databases providing a frameworkfor the activities of the Group’s legal staff. At the endof 2004, a procedures database comprising all internalprocedures, in French and English, was set up on the GroupIntranet with access rights for all employees.• Legal audits, which are carried out in certain Groupentities to check that procedures are properly appliedand the various tools are correctly used. Regular visits aremade, particularly to vulnerable countries, to check theeffectiveness of systems developed by foreign units tomanage legal risks.• Internal reporting systems, model documents and analysissystems, which are upgraded on an ongoing basis by GroupLegal Affairs to organising active tracking of new legaldevelopments, both in France and abroad.As was the case in 2003, one of Group Legal Affairs’ prioritieslast year was to help combat money laundering.During the year, Group Legal Affairs integrated the variouschanges in French and European law and drafted variousmemoranda and procedures on issues such as the preventionof money laundering, the French “Financial Security” Act, thereform of French securities laws, distance selling and certainaspects of the Retail Banking business such as consumerlending.Tax RiskIn the various countries where it does business, BNP Paribasis subject to local tax laws and regulations applicable tobanking, insurance and financial services companies.Group Tax Affairs is a global function, responsible foroverseeing the consistency of the Group’s tax solutions. Italso works with Group Finance and Development to monitorthe global tax risk. In addition, it performs backup checksto ensure that tax risks remain at a manageable level andare consistent with the Group’s reputation and profitabilityobjectives.As part of the drive to control and manage tax risks moreeffectively, during 2004 Group Tax Affairs added newprocedures and extended the tax reporting process to alldivisions. This latter initiative represented a tangible exampleof coordination between the International Tax team and theInternal Control team with Group Finance and Development.183BNP PARIBAS - ANNUAL REPORT 2004