2009 ANNUAL REPORT FINANCIAL SUPPLEMENTS - BDO

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NOTES TO FINANCIAL STATEMENTSDecember 31, 2009, 2008 and 2007(Amounts in Millions of Philippine Pesos, Except Per Share Data or as Indicated)BDO Unibank Group manages its operational risks by instituting policies to minimize its expected losses,allocating capital for the unexpected losses, and having insurance and/or a business continuity plan to preparefor catastrophic losses.FrameworkTrue to its commitment to sound management and corporate governance, BDO Unibank Group considersoperational risk management as a critical element in the conduct of its business. Under BDO Unibank Group’sOperational Risk Management (ORM) framework, the Board of Directors has the ultimate responsibility forproviding leadership in the management of risk in BDO Unibank Group. The business and service unit heads,as risk owners, are responsible for identifying, assessing and limiting the impact of risk in their businesses.The RMG provides the common risk language and management tools across BDO Unibank Group as well asmonitors the implementation of the ORM framework and policies.BDO ANNUAL REPORT 200972Since 2006, RMG has been conducting workshops with management and the operational risk coordinators topromote risk consciousness, and to instill the discipline of risk self-assessment.In 2007, the ORM Policy Manual, which defines BDO Unibank Group’s minimum requirements that mustbe strictly adhered to by all units within BDO Unibank Group, was officially released to the merged Bank’sbusiness and service units and subsidiaries. Alignment of their respective policies to this Manual has beenon-going.In 2008, RMG continued to focus on business continuity, information security, legal and regulatorycompliance, outsourcing guidelines and complaints management, where substantial mitigating measures havebeen reinforced.In 2009, RMG focused on implementing risk management tools by launching the assessment process using KeyRisk Indicators (KRI) and Key Controls Self-Assessment (KCSA) as alerts for operational risk vulnerabilities.RMG also began the groundwork for the build-up of a loss database in compliance to Basel II requirements.Operational risks are monitored to assess, measure and, eventually, manage/mitigate risks using appropriatemanagement tools (e.g., identification of key risk indicators and key controls; key controls self-assessment;building of the loss database, etc.).5. SEGMENT REPORTINGFor management purposes, BDO Unibank Group is organized into four major business segments, namely commercialbanking, investment banking, private banking and others. These are also the basis of BDO Unibank Group in reportingits primary segment information.(a)(b)Commercial banking – handles the entire lending (corporate and consumer), trade financing and cashmanagement services for corporate and retail customers;Investment banking – provides services to corporate clients outside the traditional loan and deposit products.These services include loan syndications, underwriting and placing of debt and equity securities, and financialadvisory services;
NOTES TO FINANCIAL STATEMENTSDecember 31, 2009, 2008 and 2007(Amounts in Millions of Philippine Pesos, Except Per Share Data or as Indicated)(c)(d)Private banking – provides traditional and non-traditional investment and structured products to high networth individuals and institutional accounts; and,Others – includes asset management, insurance brokerage, realty management, leasing, financing, remittance,accounting service, credit card service and computer service, none of which individually constitutes a separatereportable segment.Transactions between the business segments are on normal commercial terms and conditions. Inter-segment transactionsare eliminated in consolidation.Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in operating income.Interest charged for these funds is based on BDO Unibank Group’s cost of capital. There are no other material itemsof income or expense between the business segments.Segment assets and liabilities comprise operating assets and liabilities including items such as taxation andborrowings.Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenuesharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis.BDO ANNUAL REPORT 200973
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FINANCIAL HIGHLIGHTSIn Billion Peso
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REPORT OF INDEPENDENT AUDITORSTo th
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STATEMENTS OF INCOMEFor the Years E
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STATEMENTS OF CASH FLOWSFor the Yea
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COMPANY HEADQUARTERSBanco De Oro Un
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2009 ANNUAL REPORT FINANCIAL SUPPLEMENTS - BDO

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