CWBFG Annual Report 2022

MODEL RISK Model risk is the risk of loss or harm due to inaccurate model outputs or incorrect interpretations of model outputs, caused by inadequate model design, use and/or assumptions. Model risk can originate from inappropriate specifications, incorrect parameter estimates, flawed hypotheses and/or assumptions, mathematical computation errors, inaccurate, inappropriate or incomplete data, inappropriate, improper or unintended usage and inadequate monitoring and/or controls. The Model Risk Committee provide oversight of model risk. Our Model Risk Management standard describes the overarching principles and procedures that provide the framework for managing model risk. The standard also defines roles and responsibilities for key stakeholders involved in the Model Risk Management cycle. All models, whether developed internally or vendor-supplied, are covered by this standard.


Regulatory compliance and legal risk is the risk of loss or harm created by failing to comply with or satisfy the laws, regulations or prescribed practices that apply to CWB.

Regulatory compliance and legal risk does not include risk arising from non-conformance with ethical standards. Failure to manage these risks may result in civil or criminal litigation, administrative penalties, supervisory findings, enforcement actions, financial loss, restricted business activities, increased regulatory supervision or intervention or the imprisonment or regulatory examination of officers and directors, an inability to execute our strategic direction, a decline in client and shareholder confidence, and damage to our reputation. Management of these risks is a key priority for us, and we do so in accordance with our three lines of defence framework. REGULATORY COMPLIANCE RISK Our businesses are highly regulated through the laws, regulations and prescribed practices that have been put in place by various authorities, including federal and provincial governments and regulators. Changes to these applicable requirements, including changes in their interpretation or implementation, could adversely affect us, and we anticipate ongoing scrutiny from our regulatory authorities and strict enforcement of such requirements as reforms continue at the federal and provincial levels to strengthen the stability of the financial system and protect stakeholders. Over the past several years, the intensity of supervisory oversight of all federally regulated Canadian financial institutions has increased in both requirements and new standards. This includes amplified supervisory activities, an increase in the volume of regulation, more frequent data and information requests from regulators, and shorter implementation timeframes for new requirements. Further, new regulatory regimes are being introduced for privacy and data management, consumer protection, third-party risk management and technology oversight which enhance the complexity of compliance. Certain requirements may also impact our ability to compete against both federally regulated and non-federally regulated entities. We actively monitor these developments and implement required changes to systems and processes. We have implemented a robust Regulatory Compliance Risk Management standard and developed supporting protocols to manage regulatory compliance risk across the enterprise. LEGAL RISK Legal risk is the risk of loss or harm arising from the ways in which laws, regulatory requirements, prescribed practices or contractual obligations apply to CWB. It does not include risk arising from non-conformance with ethical standards. Legal risk is the potential for loss or harm resulting from a failure to comply with laws or satisfy contractual obligations. We are subject to litigation arising in the ordinary course of business, and the unfavourable resolution of any such litigation could have a material adverse effect on our financial results and damage our reputation. We are required to disclose material litigation to which we are party. In assessing the materiality of litigation, factors considered include a case-by-case assessment of specific facts and circumstances, our past experience, and the opinions of legal experts. FINANCIAL CRIME RISK Safeguarding our customers, employees, information and assets from exposure to criminal risk is an important priority for us. Financial crime risk is the potential for loss or harm resulting from a failure to comply with criminal laws and includes acts by employees or third parties against us and acts by external parties using CWB to engage in unlawful conduct, such as fraud, theft, money laundering, violence, cyber crime, bribery, and corruption. Our Regulatory Compliance team maintains a strong focus on key regulatory compliance areas such as privacy, anti-money laundering, anti-terrorist financing and consumer protection regulations. We govern, oversee and assess principles and procedures designed to help ensure compliance with legal and regulatory requirements and internal risk parameters related to anti-money laundering, anti-terrorist financing and sanctions measures, and our compliance with anti-corruption and anti-bribery laws and regulations.


Strategic risk is the risk that CWB or particular business areas will make inappropriate business or strategic choices, or will be unable to successfully execute processes to achieve our strategic priorities.

Strategic risk includes business risk, which arises from the specific business activities we undertake, and the effects they could have on our financial results. The Board of Directors is responsible for providing oversight of strategic risk and effective challenge and approval of our strategic plan on an annual basis. We develop a strategic plan based on an assessment of emerging market trends, the competitive environment, potential risks and other key issues. Our strategy is focused on targeted growth of our business through a combination of organic growth and strategic acquisitions. The strength of our organic growth depends on the execution of enhancements to our client experience, products, and processes that continues to attract and retain clients. The ability to successfully grow through acquisition will depend on several factors, including identification of accretive new business or acquisition opportunities, negotiation of purchase agreements on satisfactory terms and prices, approval of acquisitions by regulatory authorities, securing satisfactory regulatory capital and financing arrangements, and effective integration of newly acquired operations into the existing business. All of these activities may be more difficult to implement or may take longer to execute than we anticipate. To mitigate this risk, we rely on an effective project management process supported by a designated committee comprised of representatives of senior management.

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