Enterprise Risk at Wachovia Six Sigma Quality ManagementTable of ContentsEnterprise RiskOur ApproachContinuous ImprovementQuantitative AnalyticsQuantitative Approach (continued)Six Sigma – The DMAIC StructureSix Sigma – The DMAIC Structure (continued)Statistical OriginsEarly AdoptersExample – Wachovia ATM TransactionsAppendixWhere to Learn MoreCareers in Risk Management1© 2004 KPMG India, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in India KPMG1Institutional Risk Management GroupSeptember 2008Enterprise Risk at WachoviaSix Sigma Quality Management© 2008 Wachovia Bank N.A. All rights reserved. Table of ContentsPageEnterprise Risk .……..……………………..…………………………………….... 3Our Approach……..……..…………………………………………………........... 4Continuous Improvement…………………………………………………………. 5Quantitative Analytics.…………………….………………………………………. 6Six Sigma – The DMAIC Structure……………..………...……………………… 8Statistical Origins…………………………….……………………………………. 10Early Adopters…………………………………………………………………….. 11Example – Wachovia ATM Transactions………………………………………. 12Appendix…………………………………………………………………………… 13Where to Learn MoreRisk Management Careers2© 2008 Wachovia Bank N.A. All rights reserved. 3Enterprise RiskAt Wachovia, the business of risk management permeates daily operations. The company utilizes multiple groups and resources to address banking’s inherent exposure to Operational, Reputational, Credit, and / or Market risks. Risk considerations may include the following:Operational Risk – Concerns related to fraud, legal / regulatory / compliance, and / or Business-as-usual operationsReputational Risk – Negative perceptions created by failed mergers, system integrations, and / or customer interactionsCredit Risk – Defaults, distressed securities, spreads, and / or hedgesMarket Risk – Includes equity, interest rate, currency, and/ or commodity considerationsRisk© 2008 Wachovia Bank N.A. All rights reserved. 4To improve risk management capabilities, Wachovia abandoned a siloed approach to problem solving and created a centralized Risk Management Group (RMG). This group uses an enterprise approach to problem solving that cuts across organizational silos and product biases to deliver integrated solutions.Our Approach© 2008 Wachovia Bank N.A. All rights reserved. 5Continuous ImprovementContinuous Improvement:RMG encourages continuous improvement on all projects. Through creation of a Performance Management framework, processes can be routinely optimized long after project conclusion.Continuous Improvement:RMG encourages continuous improvement on all projects. Through creation of a Performance Management framework, processes can be routinely optimized long after project conclusion.RMG’s structure and methodology starts with the tactical requirements of Project Management. But as projects advance down the maturity curve, the group applies Process Re-Design and Performance Management strategies to drive continuous improvement.© 2008 Wachovia Bank N.A. All rights reserved. 6Quantitative AnalyticsQuantitative analytics is a primary tools used in evaluating projects. The metrics-driven approach uses Six Sigma tools and techniques to determine cost / benefit ratios and prioritize projects within the portfolio.16 $12,247,255Total Investment Total Active ProjectsRMG Project Portfolio Dashboard021475402468101214Red/Yellow/Green High/Medium/LowStatus and Risk RatingsProjects by Strategic DriverCustomer Service16%Risk Mitigation425%Compliance/ Regulatory637%Infrastructure/ Maintenance213%Cost Reduction/ Efficiency319%Total Investment by Strategic DriverInfrastructure/ Maintenance$916,0467%Risk Mitigation$3,634,87030%Cost Reduction/ Efficiency$1,043,9389%Compliance/ Regulatory$6,652,40154%543900123456789Pipeline Initiation Planning Execution Close OutProjects by Phase16 $12,247,255Total Investment Total Active ProjectsRMG Project Portfolio Dashboard021475402468101214Red/Yellow/Green High/Medium/LowStatus and Risk RatingsProjects by Strategic DriverCustomer Service16%Risk Mitigation425%Compliance/ Regulatory637%Infrastructure/ Maintenance213%Cost Reduction/ Efficiency319%Total Investment by Strategic DriverInfrastructure/ Maintenance$916,0467%Risk Mitigation$3,634,87030%Cost Reduction/ Efficiency$1,043,9389%Compliance/ Regulatory$6,652,40154%543900123456789Pipeline Initiation Planning Execution Close OutProjects by Phase$XX,XXX,XXX© 2008 Wachovia Bank N.A. All rights reserved. 7Quantitative Approach (continued)Quantitative analytics is a primary tools used in evaluating projects. The metrics-driven approach uses Six Sigma tools and techniques to determine cost / benefit ratios and prioritize projects within the portfolio.© 2008 Wachovia Bank N.A. All rights reserved. 8Six Sigma – The DMAIC StructurePhase 1• Business Case• Project Charter•Voice of the Customer•Project Plan•Roles & Responsibilities MatrixPhase 2• Data Collection and Measurement Plan• Current Environment Assessment•Risk Assessment• Failure Mode Effects Analysis (FMEA)Phase 3• Business / Functional Requirements• Gap Analysis•Communication PlanMeasureDefineAnalyzeSix Sigma methodology follows 5 distinct project phases – Define, Measure, Analyze, Improve, and Control (DMAIC). This DMAIC framework utilizes standardized tools and templates to facilitate fact-based analysis and common documentation baselines.© 2008 Wachovia Bank N.A. All rights reserved. 9Six Sigma – The DMAIC Structure (continued)Phase 4• UAT / Testing Plan• Pilot Plan•Conversion Plan•Control Plan•Education / Change Management PlanPhase 5• Service Level Agreements• Key Performance Indicators•Business Continuity Plan•Lessons LearnedControlImproveSix Sigma methodology follows 5 distinct project phases – Define, Measure, Analyze, Improve, and Control (DMAIC). This framework utilizes standardized tools and templates to facilitate fact-based analysis and common documentation baselines.Controls vs. Control PhaseIn Six Sigma, the Control Phase measures process improvements for