Overall Risk Assessment

Key risk categories for us include credit risk, market risk, operational risk, business risk (including tax and strategic risk), reputational risk and liquidity risk. We manage the identification, assessment and mitigation of top and emerging risks through an internal governance process and the use of risk management tools and processes. Our approach to identification and impact assessment aims to ensure that we mitigate the impact of these risks on our financial results, long term strategic goals and reputation.

As part of our regular risk and cross-risk analysis, sensitivities of the key portfolio risks are reviewed using a bottom-up risk assessment and through a top-down macro-economic and political scenario analysis. This two-pronged approach allows us to capture not only risks that have an impact across our risk inventories and business divisions but also those that are relevant only to specific portfolios.

Current portfolio-wide risks on which we continue to focus include: the potential re-escalation of the European sovereign debt crisis, a potential slowdown in Asian growth, disruptive US monetary tightening and its impact in particular on Emerging Markets and the potential risk of a geopolitical shock. These risks have been a consistent focus throughout recent quarters. The assessment of the potential impacts of these risks is made through integration into our group-wide stress tests which assess our ability to absorb these events should they occur. The results of these tests showed that we currently have adequate capital and liquidity reserves to absorb the impact of these risks if they were to materialize in line with the tests’ parameters.

The year 2013 saw a continuation of the global trend for increased regulation in the financial services industry which is likely to persist through the coming years. We are focused on identifying potential political and regulatory changes and assessing the possible impact on our business model and processes.

The overall focus of Risk and Capital Management throughout 2013 was on maintaining our risk profile in line with our risk strategy, increasing our capital base and supporting our strategic management initiatives with a focus on balance sheet optimization. This approach is reflected across the different risk metrics summarized below.

For purposes of Article 431 CRR, we have adopted a formal risk disclosure policy aiming to support a conclusion that our risk disclosures are in compliance with applicable legal, regulatory and accounting risk disclosure standards. A Risk Reporting Committee comprising senior representatives and subject matter experts from Finance and Risk governs our respective risk disclosure processes. Based upon our assessment and verification we believe that our risk disclosures presented throughout this risk report appropriately and comprehensively convey our overall risk profile.

Risk Profile

Our mix of various business activities results in diverse risk taking by our business divisions. We measure the key risks inherent to their respective business models through the undiversified Total Economic Capital metric, which mirrors each business division’s risk profile before taking into account cross-risk effects at the Group level. The changes from year-end 2012 mainly reflect offsetting effects of our de-risking strategy and methodology updates across risk types.

Risk profile of our corporate divisions as measured by total economic capital

 

Dec 31, 2013

in % (unless stated otherwise)

Corporate Banking & Securities

Global Transaction Banking

Deutsche Asset & Wealth Management

Private & Business Clients

Non-Core Operations Unit

Consoli-
dation & Adjustments

Total in € m.

Total

Credit Risk

17

7

1

14

5

0

12,013

44

Market Risk

18

1

6

11

5

7

12,738

47

Operational Risk

9

0

2

3

5

0

5,253

19

Diversification Benefit

(7)

(1)

(2)

(3)

(3)

0

(4,515)

(17)

Business Risk

5

0

0

0

1

0

1,682

6

Total EC in € m.

11,398

2,033

2,010

6,671

3,349

1,710

27,171

100

in %

42

7

7

25

12

6

100

0

 

Dec 31, 2012

in % (unless stated otherwise)

Corporate Banking & Securities

Global Transaction Banking

Deutsche Asset & Wealth Management

Private & Business Clients

Non-Core Operations Unit

Consoli-
dation & Adjustments

Total in € m.

Total

Credit Risk

16

6

1

13

8

0

12,574

44

Market Risk

14

1

5

11

10

5

13,185

46

Operational Risk

7

0

2

1

7

0

5,018

17

Diversification Benefit

(5)

0

(2)

(2)

(6)

0

(4,435)

(15)

Business Risk

7

0

0

0

1

0

2,399

8

Total EC in € m.

11,118

1,781

2,009

6,720

5,782

1,331

28,741

100

in %

39

6

7

23

20

5

100

0

Corporate Banking & Securities’ (CB&S) risk profile is dominated by its trading in support of origination, structuring and market making activities, which gives rise to market risk and credit risk. Further credit risks originate from exposures to corporates and financial institutions. Under CB&S’ current business model, the remainder is derived from operational risks and business risk, primarily from potential legal and earnings volatility risks, respectively.

Global Transaction Banking’s (GTB) focus on trade finance implies that the vast majority of its risk originates from credit risk with a small portion from market risk mainly in relation to derivative positions.

The main risk driver of Deutsche Asset & Wealth Management’s (DeAWM) business are guarantees on investment funds, which we report as nontrading market risk. Otherwise DeAWM’s advisory and commission focused business attracts primarily operational risk.

In contrast to this, Private & Business Clients’ (PBC) risk profile is comprised of credit risk from retail and small and medium-sized enterprises (SMEs) lending and nontrading market risk from Postbank’s investment portfolio.

The Non-Core Operations Unit (NCOU) portfolio includes activities that are non-core to the Bank’s future strategy; assets materially affected by business, environment, legal or regulatory changes; assets earmarked for de-risking; assets suitable for separation; assets with significant capital absorption but low returns; and assets exposed to legal risks. NCOU’s risk profile covers risks across the entire range of our operations comprising credit risks and also market and operational risks (including legal risks) targeted where possible for accelerated de-risking.

The execution of our divestment strategy in NCOU has resulted in a reduced balance sheet, which triggered a review of our operational risk allocation framework. In line with the NCOU business wind down, we reallocated economic capital for operational risk amounting to € 892 million to our Core Bank in the third quarter of 2013.


Key figures comparison

Compare key figures of the past years. more