体育比分网

Risk Management

体育比分网Our risk management framework is intended to facilitate a holistic, enterprise wide view of risk that supports a strong and collaborative risk management culture across the firm.

Our Approach

Risk management is fundamental to our investment approach and is ingrained within our corporate culture.

What We Do and How We Do It

Our investment platform is unique within our industry and allows us to operate efficiently and manage risks through various market environments across our four core investment strategies: the Annaly Agency Group, the Annaly Residential Credit Group, the Annaly Commercial Real Estate Group and the Annaly Middle Market Lending Group. Our business model is supported by our employees and business leaders who have deep experience navigating across markets and through different business cycles. The four investment strategies, comprised of 38 distinct investment options, are supported by robust risk management, in-house research capabilities and proprietary analytics.

How We Invest

体育比分网Our overall investment model focuses on capital preservation and income generation through disciplined investing and proactive portfolio management, supported by a conservative liquidity and leverage position.

Shared Capital Model

体育比分网Our shared capital model ensures that each investment strategy is focused on finding the opportunities with the best relative value across our diversified investment platform. This disciplined approach promotes an investment culture whereby each investment strategy is focused on risk-adjusted returns on invested capital rather than simply growing assets under management.

This shared capital model is further supported by an independent risk function with seasoned risk professionals aligned with each of the businesses.

Annaly Risk Management Framework

How We Think About Risk

Our risk management framework is intended to facilitate a holistic, enterprise wide view of risk that supports a strong and collaborative risk management culture across the firm. We maintain a risk appetite statement that defines both the level and types of risk that we are willing to manage in order to achieve our business objectives. Our risk culture seeks to ensure that key risks are highlighted, understood and managed appropriately.

We are subject to a variety of risks due to the nature of the businesses that we operate. The objective of our risk management framework is to identify, measure and monitor these risks. Risk categories include: Capital, Liquidity & Funding, Investment & Market, Counterparty, Operational, Compliance, Regulatory & Legal and Credit. Additionally, we also consider changing adverse weather patterns and events in our analysis of risk across the portfolio.

Risk management at Annaly begins with our Board of Directors and continues with executive oversight through the on-going formulation of risk management practices executed through Annaly’s in-house risk personnel. The Board, at the forefront of this risk control framework, exercises its oversight of risk management primarily through the Board Risk Committee and Board Audit Committee.

Daily assessment and management of risk is also the responsibility of our management. A series of management committees have oversight or decision-making responsibilities for Annaly’s overall risk management activities. Membership of these committees is reviewed regularly to ensure the appropriate personnel are engaged in the risk management process. Four primary management committees have been established to provide a comprehensive framework for risk management: the Enterprise Risk Committee, Asset and Liability Committee, Investment Committee and the Financial Reporting and Disclosure Committee. Each of these committees reports to our Operating Committee, which is responsible for oversight and management of our operations, including approval authority over all aspects of our enterprise risk management.

Our Operational Risk Management (ORM) practices include emergency preparedness planning and testing to maintain business continuity during events such as natural disasters and system outages. Our ORM practices also include cybersecurity assessments and testing to assess and mitigate system threats from both external and internal sources. As appropriate, results of assessments and testing are reported to the Enterprise Risk and Board committees. 

Audit Services is an independent function with reporting lines to the Board Audit Committee. Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework.

In the fourth quarter of 2018, the Company implemented an enhanced corporate compliance function, headed by a Chief Compliance Officer, who has reporting lines to the Board Audit Committee. The Corporate Compliance Group is responsible for the oversight of the Company’s regulatory compliance.

Annaly Board of Directors

Board of Directors

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体育比分网Overall firm management, including oversight of all operational and formulation of strategic direction with the help of the groups recommendations

  • Oversight of enterprise-wide risk
  • Primary risk overseen:
    • Operations
    • IT/MIS
    • Compliance
    • Cyber
    • Legal & Regulatory
    • Reputational
  • Responsible for monitoring and oversight of internal controls environment
  • Review of risks overseen by the ALCO and FRDC
  • Oversight of portfolio risk, asset allocation, financing, and investment decisions across all business silos
  • Risks overseen:
    • Investment / Market
    • Liquidity
    • Credit
    • Capital / Funding
    • Counterparty
  • Review and approve specific investments, such as:
    • Commercial Real Estate
    • Middle Market Lending
    • Residential Whole Loans
  • Oversight of all financial disclosure matters
  • Monitoring of internal controls over financial reporting
  • Oversight of SOX program
  • Active monitoring of changes in GAAP / Tax standards and related applications

Risk Categories

体育比分网 Capital, Liquidity & Funding

Risk to earnings, capital or business resulting from our inability to meet our obligations when they come due without incurring unacceptable losses because of inability to liquidate assets or obtain adequate funding.

体育比分网 Investment & Market

体育比分网Risk to earnings, capital or business resulting in the decline in value of our assets or an increase in the costs of financing caused by changes in market variables, such as interest rates, which affect the values of investment securities and other investment instruments.

Counterparty

体育比分网Risk to earnings, capital or business resulting from a counterparty’s failure to meet the terms of any contract or otherwise failure to perform as agreed. This risk is present in funding, hedging and investing activities.

Operational

体育比分网Risk to earnings, capital, reputation or business arising from inadequate or failed internal processes or systems, human factors or external events. Model risk is included in operational risk.

Compliance, Regulatory & Legal

Risk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model.

体育比分网 Credit

体育比分网Risk to earnings, capital or business resulting from an obligor’s failure to meet the terms of any contract or otherwise failure to perform as agreed. This risk is present in lending and investing activities.

体育比分网 Board Risk Committee

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Annaly Operating Committee

 

体育比分网 Enterprise Risk Committee (ERC)

  • Oversight of enterprise-wide risk
  • Primary risk overseen:
    • Operations
    • IT/MIS
    • Compliance
    • Cyber
    • Legal & Regulatory
    • Reputational
  • Responsible for monitoring and oversight of internal controls environment
  • Review of risks overseen by the ALCO and FRDC

Asset Liability Committee (ALCO)

  • Oversight of portfolio risk, asset allocation, financing, and investment decisions across all business silos
  • Risks overseen:
    • Investment / Market
    • Liquidity
    • Credit
    • Capital / Funding
    • Counterparty

体育比分网 Investment Committee

  • Review and approve specific investments, such as:
    • Commercial Real Estate
    • Middle Market Lending
    • Residential Whole Loans

Financial Reporting and Disclosure Committee (FRDC)

  • Oversight of all financial disclosure matters
  • Monitoring of internal controls over financial reporting
  • Oversight of SOX program
  • Active monitoring of changes in GAAP / Tax standards and related applications

体育比分网 Board Audit Committee

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Compliance

Audit Services

 

Enterprise Risk Committee (ERC)

  • Oversight of enterprise-wide risk
  • Primary risk overseen:
    • Operations
    • IT/MIS
    • Compliance
    • Cyber
    • Legal & Regulatory
    • Reputational
  • Responsible for monitoring and oversight of internal controls environment
  • Review of risks overseen by the ALCO and FRDC

Asset Liability Committee (ALCO)

  • Oversight of portfolio risk, asset allocation, financing, and investment decisions across all business silos
  • Risks overseen:
    • Investment / Market
    • Liquidity
    • Credit
    • Capital / Funding
    • Counterparty

体育比分网 Investment Committee

  • Review and approve specific investments, such as:
    • Commercial Real Estate
    • Middle Market Lending
    • Residential Whole Loans

Financial Reporting and Disclosure Committee (FRDC)

  • Oversight of all financial disclosure matters
  • Monitoring of internal controls over financial reporting
  • Oversight of SOX program
  • Active monitoring of changes in GAAP / Tax standards and related applications

Content on this page does not purport to be a comprehensive account of all risks that we manage. For additional information, please refer to our most recent Annual Report on Form 10-K, including the Risk Factors, and any subsequent Quarterly Reports on Form 10-Q.