NATIXIS - 2018 Registration document and annual financial report

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

Operational risk monitoring 3.2.6.3 Risk mapping Risk mapping is central to operational risk monitoring:

Business line and support function environment

Evaluation of the control environment

Incidents with financial, legal and regulatory impacts

Analysis of the change in risk profile of the business lines and support functions

Qualitative evaluation of the HR profile of the support functions

Qualitative evaluation of business line and support function policies and procedures

Qualitative evaluation of business line and support function controls

KRI

Controls

P&P

RH

Incidents

Quantitative backtesting

Mapping

Qualitative evaluation of business line and support function risks

Reduction measures

Net risk

DMR

Gross risk

RSA

by their owners

Reduction measures

Regulatory environment / Compliance

Financial industry environment

Local and international regulations

Non-compliance risks

External database, Public incidents since 1995

Incidents

Scenario analysisis

KRI: Key risk indicator RMS: Risk management system RSA: Risk self-assessment HR: Human Resources P&P: Policies and Procedures

Every year the department in charge of monitoring operational risks, in conjunction with the other control functions, works with each business line, entity and support function to map operational risks. The exercise involves identifying and descriptively analyzing risks, quantifying the risk situations (average frequency, average and maximum loss), and taking into account existing risk management mechanisms. This mapping is based on process analysis and is carried out for all the bank's activities. Its consistency is verified through backtesting, in other words by using the incident history, as well as external data where relevant. The risk mapping process serves to identify Natixis' exposed business lines and its biggest risks in order to be able to manage them through corrective action and indicators. The mapping of “global and systemic risks” (extreme risk situations occurring infrequently, such as major natural disasters, pandemics, and attacks) draws on external data on

incidents in the financial industry, especially for establishing frequency. Also factored in are assumptions on unrealized net revenue items and the effectiveness of risk management mechanisms, as well as contingency and business continuity plans. In addition to risk mapping, there are over 600 key risk indicators (KRIs) in place with corresponding limits, and which are monitored regularly. KRIs dynamically detect any changes in the operational risk profile and cover the seven Basel categories of loss-generating events. They apply either to Natixis (overall indicators), to the business lines, or to the support functions that, with the operational risk manager, set the indicators as relevant early warning indicators during the mapping process. These indicators are submitted to the Operational Risk Committee for approval. Any breach of their thresholds, that is the subject of a systematic alert, may trigger action to be carried out immediately or requiring committee approval.

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Natixis Registration Document 2018