Governance of Compliance - A PRACTITIONER’S VIEW

1. Governance of Compliance - A PRACTITIONER’S VIEW Risk and Compliance working effectively together to address the business’ Risks Jan van Vulpen June 7, 2007

2. “It would be a mistake to conclude that the only way to succeed in banking is through ever-greater size and diversity. • Indeed, better (integrated Compliance and) Risk Management may be the only truly necessary element of success in banking." • Former Federal Reserve Board Chairman Alan Greenspan, October 5, 2004

3. Evolving Compliance Drivers • Our Industry and organization is in the throes of great transformation Change Imperative • Evolving compliance is imperative to support ABN AMRO Asset Management’s ambition • Enhancing risk-reward decision making through aligning risk appetite with strategic planning processes • Streamlining sales and delivery of products/services to market • Higher product profitability through risk-adjusted pricing Value Proposition

4. Today’s Discussion Why Evolving Compliance? Classical set-up Compliance & Risk Management Approach to more integration of Compliance and Risk Management ABN AMRO’s “Evolution” Lessons learned Path Forward

5. Why Evolving Compliance?

6. The Environment is Changing… Increasing cost of regulatory compliance Infrastructure Rationalization • Global trends and continuing industry evolution has driven leading banks to form a more integrated approach to managing Compliance AND RISK MANAGEMENT. Embracing opportunities in new markets Consolidation to achieve strategic balance As the business environment evolves, risk management is quickly becoming a significant competitive differentiator

7. Stakeholders Are Watching… Regulators • Increased scrutiny • Higher expectations • Assessing Components: compliance & risk management culture, risk control, extreme event management, risk and capital models, and strategic risk management Rating Agencies • Increasing interest in evolving Compliance • Greater scrutiny of capital raising using exotic transactions Investment Banks Investors • Rewarding greater disclosure • Punishing negative surprises Successfully embracing these changes will support ABN AMRO Asset Management’s ambition

8. Firms With An Integrated Compliance and Risk Management Program Can Answer The Following Questions … 1. For a new opportunity, what factors have the biggest impact on your corporate strategies? What is the impact of these factors on your organization’s risk appetite? Strategy Formulation How do these compliance and risk factors affect your balance of risks? Balance Of Risks Monitoring Governance How are Business Units managing and integrating these compliance issues and other risks to achieve their business objectives and enhance profitability with appropriate pricing? How effectively do reports measure correlations amongst these risks? BusinessExecution … how comfortable are you at answering these questions?

9. To remain competitive, ABN AMRO Asset Management evolves…

10. Classical Set-up Compliance & Risk Management

11. ……

12. Strategic Liquidity Credit Operational Country Compliance Market Classical Set-up Compliance & Risk Management Classical approaches to managing risk focused on establishing well maintained and controlled processes around single risk factors. Line of Business Historically, this approach to managing risk has been appropriate for the environment. However, as the environment changes, so must the discipline.

13. Environment Classical Set-up Compliance and Risk Management • Classical Capabilities • Single Risk View • Reward-based Decision Making • Risk Controlling Culture • Achieve Objectives • Share of Wallet • Product Profitability • Sweet Spot Clients • Winning Formulas Limitations • Inability to identify, analyze and transplant winning formulas • Competitors with better risk-based pricing cherry pick customers • Lack of inter-related risk analysis limits additional customer cross sell As competitors continue to evolve their compliance and risk management approach, classical approaches will increasingly erode an organization’s ability to achieve its strategic objectives.

14. Approach to more integration of Compliance and Risk Management

15. Evolving an Existing Foundation ABN AMRO has accomplished and continues to make progress towards evolving its risk management capabilities. Data Succession Planning Compliance People Capital Allocation “Sweet Spot”Strategy “One Bank” Economic Capital Meta Policy Portfolio Management SOXA Risk Appetite Governance Strategic Planning Basel II GlobalOutlook Common Compliance and Risk Management Framework Current State Desired State Customized Plan to Evolve

16. Environment Benefits Of An Integrated Approach • Achieve Objectives • Share of Wallet • Product Profitability • Sweet Spot Clients • Winning Formulas • Evolved Capabilities • Portfolio Risk View • Reward-Reward based decision Making • Risk Aware Culture Benefits • Enhanced risk-reward decision making through aligning risk appetite with strategic planning processes • Streamlined sales and delivery of products/services to market • Higher product profitability and reduced write offs through risk-adjusted pricing • Fewer compliance penalties through integrated compliance monitoring Achieving the benefits of evolving risk management will support ABN AMRO Asset Management’s ambition.

17. Lessons Learned

18. Lessons Learned • Sustainability • To sustain progress and momentum, maintain program team continuity. • Sponsorship • Successful Risk Management implementations require senior management and Board support. Compliane and Risk Management Framework • Project Management • Do not underestimate launch complexities or cultural challenges. • Pilot programs prior to global roll outs. • Change Management • Significant effort will be required to overcome organizational inertia and change a mindset to a risk-reward culture

19. Evolving Around The Globe ..better (integrated compliance and) risk management may be the only truly necessary element of success in banking - Alan Greenspan

20. Contact J. van Vulpen ABN AMRO Asset Management De Entrée 99 – 197 Amsterdam +31 20 3832497