Senior Management

The following statements describe the rating categories for the assessment of Senior Management’s oversight of the institution’s activities and related risks, with due consideration to the institution’s safety and soundness.

The characteristicsof Senior Management meet or exceed supervisory expectations of what is considered necessary, given the nature, scope, complexity, and risk profile of the institution.  Senior Management characteristics and performance are superior to supervisory expectations.

The characteristicsof Senior Management meet what is considered necessary, given the nature, scope, complexity, and risk profile of the institution.  Senior Management performance has been effective.  Senior Management characteristics and performance meet supervisory expectations.

The characteristicsof Senior Management generally meet what is considered necessary, given the nature, scope, complexity, and risk profile of the institution, but there are some significant areas that require improvement and may affect effectiveness in the future or under adverse conditions. Senior Management performance has generally been effective, but there are some significant areas where effectiveness needs to be improved. The areas needing improvement are not serious enough to cause prudential concerns if addressed in a timely manner. Senior Management characteristics and/or performance do not consistently meet supervisory expectations.

The characteristicsof Senior Management are not, in a material way, what is considered necessary, given the nature, scope, complexity, and risk profile of the institution and may affect effectiveness in the future or under adverse conditions. Senior Management performance has demonstrated serious instances where effectiveness needs to be improved through immediate action. Senior Management characteristics and/or performance often do not meet supervisory expectations.

The following criteria describe the characteristics OSFI will use in assessing the quality of Senior Management oversight of the institution’s activities and related risks, with due consideration to the institution’s safety and soundness.  The application and weighting of the individual criteria will depend on the nature, scope, complexity, and risk profile of the institution and will be assessed collectively, together with Senior Management performance, in rating its overall effectiveness.

1.1 Extent to which the Board has delegated to the CEO responsibility for developing and implementing policies and practices for the effective management of the institution’s operations.  This may include, but is not limited to:

1. Strategic management (e.g., long and short term strategy);

2. Risk management (including the RAF);

3. Liquidity and capital management;

4. Internal control (including the Internal Control Framework);

5. Ethical business conduct; and

6. Compensation policy for all human resources that is consistent with the Financial Stability Board (FSB) Principles for Sound Compensation.

1.2 Adequacy of policies or practices to delegate responsibilities from the CEO to other members of Senior Management and to regularly review the appropriateness of the delegation.

1.3 Appropriateness of the mandates for Senior Management positions and the extent to which they clearly define lines of authority, responsibility and accountability. Extent to which these mandates are communicated across the institution.

1.4 With respect to the Oversight Functions on which it relies (i.e., Internal Audit, Risk Management, Financial, Compliance, Actuarial), the extent to which Senior Management:

1. recommends for approval by the Board the appointment, performance reviews and succession plans of the function heads;

2. ensures that they have adequate authority, independence and resources to carry out their mandates;

3. provides appointees with unfettered access to Senior Management and the Board; and

4. monitors effectiveness of the Oversight Functions.

2.1 Adequacy of policies or practices to regularly review the institution’s organization structure.

2.2 Appropriateness of the institution’s organization structure.

3.1 Extent to which Senior Management committees are used to oversee the management of significant activities and related risks.

3.2 Extent to which Senior Management committee mandates are clearly defined and communicated across the institution.

4.1 Adequacy of policies or practices to regularly review the range of qualifications, knowledge, skills and experience required to fulfill Senior Management responsibilities.

4.2 Appropriateness of the range of qualifications, knowledge, skills and experience available to fulfill Senior Management responsibilities.

4.3 Adequacy of policies and practices for the selection, appointment and succession of Senior Management.

4.4 Extent to which management development programs are available to Senior Management.

5. Practices

5.1 Adequacy of policies or practices to establish business objectives, strategies and plans, and to monitor the institution’s performance against them.

5.2 Adequacy of policies or practices to regularly review the adequacy and effectiveness of the institution’s liquidity and capital management.

5.3 Extent to which risk management policies and practices are:

1. Enterprise-wide;

2. Linked to with strategic, capital and liquidity management;

3. Prudent in the context of the risk profile of the institution and aligned with the institution’s Risk Appetite Framework and compensation policy;

4. Reviewed regularly for appropriateness; and

5. Communicated to appropriate individuals across the institution.

5.4 Adequacy of processes, techniques and criteria used to consistently identify, measure, monitor, control and report significant risks, and to ensure that approved risk management policies and practices are adhered to.

5.5 Adequacy of policies and practices to ensure regular review of the organizational and procedural control environment.

5.6 Adequacy of policies and practices to ensure compliance with applicable laws, regulations and guidelines.

5.7 Extent to which human resource policies and practices give priority to attracting, developing and retaining high-calibre staff, and promoting good morale within the institution.

5.8 Extent to which compensation programs promote prudent risk taking and are aligned with the long-term strategic objectives and risk appetite of the institution.

5.9 Adequacy of policies and practices for communication and disclosure to stakeholders.

5.10 Extent to which management policies and practices promote sound corporate governance and ethical business conduct.

6.1 Extent to which Senior Management seeks Board approval for:

1. The institution’s short and long term business plan, strategy and significant strategic initiatives;

2. Its Risk Appetite Framework, Internal Control Framework, codes of ethics and conduct, and the significant policies and plans related to the management of capital and liquidity;

3. The appointment, performance review, compensation and succession of key members of Senior Management;

4. The mandate, resources and budgets for the Oversight Functions; and

5. Audit plans, both internal and external.

6.2 Extent to which Senior Management seeks Board advice and counsel for:

1. Significant operational, business, risk, and crisis management policies and their effectiveness; and

2. Business performance and the effectiveness of risk management.

6.3 Extent to which there is full, open and timely disclosure to and discussion with the Board (or its committees) on all significant issues.

6.4 Extent to which effective policies or practices are in place for the escalation of key issues to the Board.