Company: WBS-PG
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000801337-25-000004
Chunk: 158

Company: WEBSTER FINANCIAL CORP
Filing Date: 2025-03-03
Form: 10-K
Item: Item 1
Chunk 158
---
 or aligned with business objectives, do not satisfy customer needs, dilute shareholder value, or expose assets to misappropriation or misuse.

11

•Model risk is the risk that arises from errors within a model and/or incorrect use of a model, while considering the degree of reliance on model output in decision making.

•Legal risk is the risk of financial or reputational exposure resulting from either Webster or third party-initiated litigation, contract disputes, transactions, or compliance/regulatory failures that could result in fines, penalties, and/or imprisonment. In addition, it includes the risk that the organization’s governance structure is inadequate to facilitate Board oversight of Webster activities to ensure alignment with regulatory guidelines and supervisory expectations.

•Physical Security risk is the risk that arises from the inability to protect Webster’s assets, including infrastructure and people, from natural and/or man-made disasters that would impair its ability to operate in a controlled environment.

Webster mitigates operational risk through an operational risk management framework, which provides for a set of tools to identify, assess, monitor, control, and report on operational risk. The framework enables the lines of business and corporate functions to establish accountability for the timely and effective management of identified risks, control failures, or other related gap/deficiencies that are reinforced through incentive structures. Webster seeks to control operational risk within an acceptable range, which is determined by the types of businesses in which it engages. Control of operational losses depends on identifying the types of transactions and operational risks faced at the enterprise and business level, and ensuring effective internal control processes are in place to mitigate these risks. 

The Head of Operational Risk is responsible for operational risk oversight. Additionally, the Operational Risk Management Committee is responsible for providing oversight and governance of operational risk.

Credit Risk 

Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations to Webster. Credit risk arises in Webster’s lending operations, and in its funding and investment activities where counterparties have repayment or other obligations to Webster. Credit risk can also arise from other solutions or services that involve customer obligations for the transfer of funds.

The overall focus of credit risk management is to balance returns relative to risk while operating within stated risk tolerances. Webster maintains underwriting standards consistent with our desired risk profile and robust credit processes. Webster’s loan portfolio is balanced to include both commercial and consumer lending activity, while closely managing concentrations in borrowers, counterparties, industries, and solutions to avoid excessive correlated risk.

Diversification of the loan portfolio across commercial and industrial, specialty