Why do we talk about managing banking risks?

It's a bank's job to take and control several different types of risk. For the bank, all risks are also characterised by a cost, which is tied among other things to the obligation to "manage its capital requirements", i.e. to prepare for the financial impact of a risk materialising. It is paid to take this risk.

What are the typical risks involved in the banking business?

A universal bank like Societe Generale manages a whole array of risk types including:

• Credit risk, which is the risk of losses resulting from the inability of the Bank's clients, issuers or other counterparties to keep up with their financial commitments.
• Market risk, a term which covers risks generated by market activities (interest rates, exchange rates and loss of value in financial instruments).
• Operational risks, which mean risks of losses or sanctions mainly due to procedural failings, human error or external events.
• Liquidity risk, i.e. the risk that the Bank may not be able to meet its liquidity requirements.

What is Societe Generale Group's risk policy?

Maintaining strict risk management is one of the guiding principles of Group strategy and one of the focuses of its transformation. Risk management is steered from the highest echelons of the company. Each type of risk is addressed by a specific internal control mechanism. These mechanisms are detailed in the registration document submitted each year to the French financial markets authority and also available on the www.societegenerale.com website.

However, risk control goes well beyond the control mechanisms alone. In 2011, Societe Generale launched an Enterprise Risk Management programme, which included as one of its main objectives the widespread introduction of a risk awareness culture throughout all the Group's business lines and at all levels. The programme thus seeks to introduce a preventative approach whereby each employee raises awareness and increases control over the risks his or her business line may incur for the company as a whole.

Above and beyond processes and mechanisms, this common culture is the best guarantee of quality in the Bank's risk management.

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