Société Générale / Risk report 2021 - Pillar 3 2020

12 LIQUIDITY RISK GOVERNANCE | SOCIETE GENERALE GROUP | PILLAR 3 - 2021 205 committed facilities provided by Societe Generale, increase in margin calls related to derivatives portfolios, etc. The survival horizon is the moment in time when the net liquidity position under such assumptions becomes negative, the overall transformation position of the Group (proper - matching of assets and liabilities, in tenors up to 5 years), the amount of free collaterals providing an immediate access to - central bank funding, in case of an emergency (only collaterals which do not contribute to the numerator of the LCR are considered, i.e. non-HQLA collaterals); yearly budget process aimed at ensuring that the forward financial p trajectory under baseline and stressed scenarios will fulfil the risk appetite targets set by the Board of Directors and at calibrating accordingly the funding plan. The budget’s baseline scenario reflects the central assumptions for the macro-economic environment and the business strategy of the Group, while the stressed scenario is factoring both an adverse macro-economic environment and idiosyncratic issues; the funding plan comprises both the long-term funding programme, p which frames the issuance of plain vanilla bonds and structured notes, and the plan to raise short-term funding resources in money markets; maintenance by the Group Treasury Department of a Funds Transfer p Pricing framework, aimed at making funding grids available at any time for Business Units to transact with the Corporate center to upstream their liquidity surplus or borrow cash so that they fund their activities within their transformation position limits; dedicated central production team. The net liquidity position under the combined (idiosyncratic and market/systemic) stress scenario is reassessed on a weekly basis and can be analysed along multiple axes (per product, Business Unit, currency, legal entity). Each key metric (LCR, NSFR, transformation positions, net liquidity position under combined stress) is reviewed formally on a monthly basis by the Group Finance and Risk divisions. Forecasts are made and revised weekly by the Strategic and Financial Steering Department and reviewed during a Weekly Liquidity Committee chaired by the Head of Group Treasury. This Weekly Liquidity Committee gives tactical instructions to Business Units, with the objective to adjust in permanence the liquidity and funding risk profile, within the financial targets and taking into account business requirements and market conditions; production and broadcasting of periodic liquidity reports, at various p frequencies (daily indicators, weekly indicators, monthly indicators), leveraging in most part on the central data repository, operated by a preparation of a Contingency Funding Plan, which is updated yearly, p and provides for: (i) a set of early warning indicators ( e.g. market parameters or internal indicators); (ii) the operating model and governance to be adopted in case of an activation of a crisis management mode (and the interplay with other regimes, in particular Recovery management); (iii) the main remediation actions to be considered as part of the crisis management. These various operational steps form overall the ILAAP (Internal Liquidity Adequacy Assessment Process) framework of Societe Generale. Every year, Societe Generale produces for its supervisor, the ECB, a self-assessment of the liquidity risk framework in which key liquidity and funding risks are identified, quantified and analysed with both a backward and a multi-year forward-looking perspective. The adequacy self-assessment also describes qualitatively the risk management setup (methods, processes, resources), supplemented by an assessment of the adequacy of the Group’s liquidity. GOVERNANCE 12.3 Based on the guiding principles and on the operational setup described above, the following bodies are involved in the control of liquidity and funding risks: the Board of Directors, which: p sets yearly the level of liquidity risk tolerance as part of the - Group’s risk appetite, based on a set of key metrics, which includes both internal and regulatory metrics, in particular the period of time during which the Group can operate under stressed conditions (“survival horizon”), approves budget targets, including targets related to scarce - resources such as liquidity usage and funding (definition of the funding plan), reviews at least quarterly the Group’s liquidity and funding - situation: key liquidity metrics, including the pace of execution of the funding plan and the related cost of funds; General Management, which: p allocates liquidity and funding targets to the various Business - Units and the Group Treasury entity, upon proposal from the Group Finance division, Units, which is responsible for monitoring structural risks and managing scarce resources: defines and implements the liquidity and funding risk strategy, - based on inputs from the Finance and Risk Divisions and the Business Units. In particular, the General Management chairs the Finance Committee, held every 6 weeks and attended by representatives from the Finance and Risk Divisions and Business validation and monitoring of the set of limits for structural • risks, including liquidity risk, monitoring of budget targets and decisions in case of a • deviation from the budget, definition of principles and methods related to liquidity risk • management ( e.g. definition of stress scenarios), assessment of any regulatory changes and their impacts; • the Group Finance Division, which is responsible for the liquidity and p funding risks as First Line of Defence, interacting closely with Business Units. Within the Group Finance Division, there are three main departments involved respectively in the preparation and implementation of decisions taken by the abovementioned bodies: the Strategic and Financial Steering Department is responsible - for framing and overseeing management of the Group’s scarce resources, including liquidity, within the Group’s risk appetite and budget targets, the Group Treasury Department is in charge of all aspects of the - operational management of liquidity and funding across the Group, including managing the liquidity position, executing the funding plan, supervising and coordinating treasury functions, providing operational expertise in target setting, managing the