Corporate risk control is exercised in an integrated and independent manner. The process preserves and values the joint decision making environment by means methodologies, models and measurement and control instruments. Control-related policies are aligned with the Organization’s strategic goals, with best practices in Brazil and abroad, and with legislation and the regulations established by regulatory bodies. They are reviewed at least once a year by the Board of Directors and made available to all employees and related companies via the corporate intranet.

Risk and capital management is supported by committees that aid the Board of Directors, the CEO and the Executive Board in strategic decision making. The Integrated Risk Management and Capital Allocation Committee is supported by the Executive Capital Management Committee and the Executive Risk Management Committees, covering the different types of risk: credit, market, liquidity, operational, social and environmental and Basel, as well as those associated with the Grupo Bradesco Seguros and BSP Empreendimentos Imobiliários.

Further information in http://goo.gl/zoIhnM

This structure also includes the Executive Products and Services Committee and the business area Executive Committees, whose attributions include suggesting exposure limits for their respective risks and preparing mitigation plans to be submitted to the Integrated Risk Management and Capital Allocation Committee and the Board of Directors.

In the Credit Risk area, during the course of 2015 the Organization focused on capital needs efficiency, dedicated to improving processes and controls to optimize the calculation of capital. For Bradesco, the constant improvement and qualification of these processes are fundamental for attributing weight to and mitigating risks, driving improvements in the assessment of capital needs, generating value for the operation and enabling the monitoring of delinquency in a challenging conjuncture.

The Organization has an organizational credit control tool for all its segments of activity. It identifies and monitors solvent and insolvent clients and enables the offer of solutions to mitigate cases of insolvency. The solution serves as a first line of defense for risk management and the quality of the credit model in place.

As a preventive measure, the Department of Integrated Risk Control also monitors the credit groups and reports on these and on the monthly evolution in credit to the Board of Directors, which communicates improvements and requirements for action to the entire corporation.

Structure of credit department


INDEPENDENCE: Credit is segregated from the commercial structure and is independent with respect to policy proposal and decision making. CENTRALIZATION: The Credit department has teams specialized in different businesses in the Organization but under single, centralized management at headquarters, driving aligned goals and synergies. KNOWLEDGE SYNERGY: The experiences, learning and advances are transmitted to all the business lines, resulting in gains in efficiency and in credit performance.
STRUCTURE OF CREDIT DEPARTMENT. Item BANCO BRADESCO com 3 sub-itens: CORPORATE, RETAIL e VAREJO. Item CARDS. Item BRADESCO FINANCIAMENTOS. Item BRADESCO CARTÕES PROMOTORA

Bradesco develops all the technology solutions applied in its operations, services and products. One of these is automatic credit analysis which involves 97.7% of the more than 200,000 proposals received daily. Undergoing constant improvement, the tools use internal inputs, such as analysis of client behavior, and external ones, such as micro and macroeconomic and industry data, as well as consumer credit rating agency data (such as Serasa Experian). The credit proposals that are not analyzed automatically are processed by analysts who also use internal and external information to validate or not the contract. The model has helped ensure the low variation in the Organization’s delinquency rates over the last five years, as well as in managing social and environmental risks.

By means of new risk and guarantee classification models, the Organization has expanded the quality of the credit offering and improved profile analysis of its individual and company clients. The adoption of more effective security criteria helps maintain the balance between the expanded offer of credit and the reduction of delinquency. In this context, two programs are worthy of note: the Overdue Loan Collection Program (PCV) and the Credit Recovery Program (PRC), which make credit concession processes more rigorous and the daily collection of overdue amounts more efficient.

Read more about this in the chapter

Economic-Financial Performance.

Credit productivity

Volume of credit proposals
up to 200,000 proposals per day

Analysis based on judgment : 2,3%. Statistical model-based decision making : 97,7%.
Asset volume
Base dec./2015 – r$367 billion

High retail: 7,1%. Large and medium companies : 44,4%. Retail: 48,5%. Medium-sized companies are gradually migrating to statistical-model based decisions.

Risk map

Among the main types of risk, worthy of note are:

Credit Operating
Counterpart credit Strategy
Concentration Legal or compliance
Market Legal unpredictability (regulatory risk)
Liquidity Reputation
Subscription Social and environmental

As a line of defense, risk management seeks to anticipate events and market situations, constantly improving management and control tools to mitigate potential impacts. In 2015, the Organization promoted the following innovations:

Credit risk
  • Inclusion of Bradescard México in the integrated provisioning calculation and the detailing of business segments for use by the risk center. The work included assessments and analyses of quality and management improvements in the segments served, as well as prospection and new business opportunities.
  • In 2015, the Organization reviewed the scope of social and environmental risk so that any company with a pre-existing restriction, such as use of forced labor or embargoed areas, involved in operations of more than R$5 million is analyzed by a specialized team.
Market risk
  • Centralization of pricing processes and instruments for mark-to-market calculations, previously undertaken by the back office and SPSS, in the Integrated Risk Control Department, which also coordinates the Mark-to-Market Commission.
  • Adaptation of prudential adjustments to the new regulations, further strengthening the process of determining the price of an asset for the mark-to-market calculation.
  • Definition of governance, boundaries and committees for Seed Money – process by which the manager initializes the net equity of a fund to make it attractive to investors. The Seed Money will be made operational by BRAM Asset Management.
Liquidity risk
  • Adoption of a new liquidity ratio in situations of stress based on the Liquidity Coverage Ratio (LCR), which is designed to ensure the Organization has enough assets available to ride out disruptions in liquidity. The ratio will be disseminated from April 2016, but has been in operation since October and has been reported to the regulatory authority.
Business Continuity Plan
  • A series of procedures was established for the Business Continuity Plan with third-parties, in which it is possible to identify whether the service provision is or is not relevant. Upon classification within the relevance criteria, the party must adopt determined procedures and controls, such as providing up-to-date information about changes in critical processes.
Integrated risk
  • The Risk Indicator Tracking Commission was constituted in April 2015 to act preventively in monitoring crisis situations through the adoption of quantitative and qualitative indicators.

Read more at

http://goo.gl/yzhUi7
Social and Environmental risk
  • Formal introduction of social and environmental risk in the Organization’s Risk Governance structure, as well as the determination of the Social and Environmental Risk Standard.
Fachada de uma agência Bradesco.
Interior de uma agência Bradesco. Fachada de uma agência Bradesco. Lixeiras de coleta seletiva.

Climate change

G4-EC2

Climate change represents a major challenge in the long and short term, imposing risks and offering opportunities for both the Organization’s and the clients’ businesses. Although there is no financial analysis to measure the potential to generate change in the Organization’s revenues or losses on a broad level, it does recognize the potential impacts, whether direct – related to the operations and installations –, or indirect, arising from the effect on diverse segments of the real economy and the way this affects credit, investment and insurance.

For this reason, the Organization maintains:

  • In its operations: assessment of opportunities for improvements in eco-efficiency, adopting positions to reduce emissions and anticipate risk management.
  • In the businesses: constant evaluation of the demand for financial and insurance products that offer clients suitable solutions, both for driving a low carbon economy and for protecting them from the impacts or preparing them to adapt to transformations caused by climate change.
  • Operating risk: to avoid damage to facilities by climatic events, the major precaution to be taken is preventive maintenance with annual reviews and the adoption of protective measures. The measurement and control of operational risks are carried out in a centralized and independent manner and managed at local, regional and global level. The Business Continuity Plans for the business units and the Disaster Recovery Plan for the Information Technology (IT) area are aimed at mitigating exposure to these risks, especially in the areas considered critical for the provision of services to clients. The Business Continuity Plan is put into action when employees are unable to access the work place. The plan establishes the use of alternative locations and the Corporate Business Continuity site in Alphaville (São Paulo). The Information Technology Center has duplicated infrastructure for the supply of electricity, air conditioning and no-breaks/generators, in addition to its own contingency environment located in another city, 16 km from the headquarters.
  • Social and Environmental Risk: in the decision making processes for the concession of credit for financing large projects, the company takes into account the Equator Principles guidelines; it also assesses and monitors projects not covered by this commitment but which present significant risks. With the adoption of the 2012 version of the International Finance Corporation (IFC) standards by the Equator Principles, projects that are financed in accordance with its directives and which expect to emit more than 25,000 tons of carbon per year are required to quantify their emissions and to study financially viable alternatives for reducing or offsetting such emissions.
Portfolio of projects being monitored in December 2015
PROJECTS RISK CATEGORY No. of contracts Amount financed (R$ million)
Classified under the Equator Principles A (high) 12 3,994
B (medium) 20 1,348
C (low) 13 2,077
Not classified under the Equator Principles   142 7,319
Total   187 14,737
Portfolio of projects being monitored by sector X region in December 2015 G4-FS6 G4-FS6
  NORTH NORTHEAST SOUTHEAST SOUTH MIDWEST Total
  Amount Number
(R$ million) 		Amount Number
(R$ million) 		Amount Number
(R$ million) 		Amount Number
(R$ million) 		Amount Number
(R$ million) 		Amount Number
(R$ million)
Agribusiness         16 610     7 269 23 878
Energy 6 1,651 4 423 5 350 1 315 3 206 19 2,945
Real estate 2 122 18 592 75 5,092 8 406 4 153 107 6,366
Infrastructure 1 20     8 2,450     1 250 10 2,720
Mining     3 111             3  111
Oil and Gas 1 80                 1 80
Others 3 317 3 318 15  697 3 341     24 1,673
Total     13 2,190 28 1,444 119 9,199 12 1,062 15  878 187 14,773
  • Regulatory risks: Bradesco seeks to anticipate future regulations related to the mitigation and adaptation to climate change by constant participation in forums that discuss and study this issue.
  • Underwriting risks: in the inspection reports used by Bradesco Auto RE to assess asset risks, factors such as storms, hail, damage caused by rainfall and flooding, among other events directly or indirectly linked with climate change, are analyzed.

Some financial implications for direct aspects of the operation have already been felt, an example being water scarcity and its impact on energy costs. The Brazilian energy grid is powered mainly by hydroelectric plants. Since 2012 the country has seen an increase in demand for electricity (3.5% in 2012, 3.4% in 2013 and 2.2% in 2014), while suffering from a shortage of rainfall, provoking a negative effect on power generation. Rainfall improved substantially only at the end of 2015 and the beginning of 2016. During the period with low rainfall levels, the government brought thermal power plants into operation, driving up electricity costs.

Among other criteria, the Equator Principles are considered in credit decisions involving large projects

In function of measures adopted by the government to stabilize the energy sector with tariff increases of around 55%, Bradesco underwent a 50% rise in electricity costs compared with 2014. Its spending on electricity in 2015 totaled R$292 million, representing an increase of approximately R$100 million.

Despite the increase in tariffs, the expansion of the network and the acquisition of equipment, the initiatives promoted by the Asset Department enabled Bradesco to reduce consumption by 2.5% (compared with 2014). Worthy of note among these was the implantation of the Electricity and Water Management System (a tool the enables the monitoring and analysis of monthly electricity and water consumption by the bank’s installations, enabling users to visualize their monthly expenditure and targets on a graph) using LED technology, among others.

Fachada de uma agência Bradesco

In addition to the conscious consumption campaigns, such as Zero Waste in the Agency Network and the Eco-efficiency Management Program, the Rationalize Campaign (conscious consumption of water and energy) was developed in 2015 for implantation in 2016. This involves communication and educational measures for the entire Organization. These measures reduced the financial impact of the projected tariff increase by 4%.

DMA Environmental and social compliance

For 2016, the target is to further reduce energy consumption by 2.4% compared with 2015. Regarding the methods used to manage risks and opportunities, since 2008 Bradesco has conducted a Greenhouse Gas (GHG) Emissions Inventory based on the Brazilian GHG Protocol program and on the NBR-ISO 14064-1 standard. The Organization sets targets for reductions in emissions and has systematically undertaken measures to mitigate them, in addition to having offset 100% of its Scope 1 and 2 emissions since 2011.

Read more about the financial implications and other risks and opportunities arising from climate change in the CDP Report (in particular chapters 5 and 6) at http://goo.gl/Td4V63

Goals and targets for 2015 Status Justification Goals and targets for 2016
Implement a new automation tool for controlling market and liquidity risks In progress The 1st phase was implanted – calculation of options risk. The other phases are scheduled to be finalized by 2018. Organize training workshop for suppliers in the CDP Supply Chain
Review liquidity risk based on the new Basel Committee rule In progress Completion is scheduled for the end of the first half of 2016. Organize 14th Bradesco Suppliers Encounter