2005 Annual Report Julius Baer Holding Ltd. - GAM Holding AG

Hedges
The Group hedges a portion of interest rate risk associated
with cash flows resulting from term deposits
or term loans by employing interest rate swaps. The
market value of these swaps on 31 December 2005
amounted to a net CHF –1.0 million.
On 31 December 2005, the Group carried no fair
value hedges on its books.
6. Operational risks
6.1. Operational risk framework and process
We define operational risk as the potential occurrence
of losses as a result of the inappropriateness
or failure of internal procedures, personnel and systems
or due to external events. This framework also
includes regulatory and supervisory risks.
Within this context, in its paper Sound Practices for
the Management and Supervision of Operational Risk
the Basel Committee formulates qualitative standards
regarding organizational structure and risk management
as well as quantitative guidelines for identifying
and measuring operational risks. We already adhere
to these standards today while preparing for the
demands of the future by implementing targeted
measures and taking a proactive approach.
The department Group Risk Management Operational
Risk has Group-wide responsibility for developing and
implementing an internal framework for steering
operational risk (excluding legal risks and compliance
risks), which includes guidelines and methods for
identification and early detection of risks as well as
the definition of appropriate reporting structures for
achieving timely and efficient management reporting.
In addition, this department coordinates all topics
associated with operational risk in order to chronicle
and illuminate these topics throughout the Group as
well as to be able to minimize the potential financial
consequences from operational risks by taking appro-
priate measures. The objectives of operational risk
management are as follows:
Notes
– Avoiding potential substantial losses
– Reinforcing a high degree of risk awareness at all
levels
– Reinforcing an efficient early warning system
– Reinforcing the existing “culture of risk awareness,
risk responsibility and risk control”
– Assessing all operational risk issues before new
services or products are offered by the organization
– Assuring the smooth operation of business in the
event of infrastructure breakdowns and catastrophes
by regularly monitoring and updating the
business recovery plan as well as the crisis management
preparations within the scope of effective
Business Continuity Management (BCM)
The goal of BCM is to ensure that precautionary
measures are in place to mitigate the vulnerability for
interruption of vital business functions due to natural
disasters, catastrophic events and other events over
which businesses have no control such as fire, earthquake,
terrorist attacks, war, floods and epidemics.
Therefore respective directives and standards are in
place.
If a catastrophic event occurs, an Emergency Management
Team (EMT) consisting of pre-determined
members will convene with the purpose of ensuring
that Julius Baer Group reacts to any catastrophic
event in a way that minimizes any interruption to the
business. The EMT investigates the origin, and
assesses the effects of potentially catastrophic
events and is responsible for identifying and implementing
adequate counter-measures. The EMT is supported
by several sub-committees, responsible for,
among other things, taking emergency measures,
gathering information and resuming business. Each
branch has its own emergency organization, tailormade
to the size of the branch. All local EMTs are
supported by the main team in Zurich. All processes
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