Sustainability at UBS

	Return to sustainable profitability Rebuilding reputation and trust Societal commitments

Return to sustainable profitability

In 2008, our bank experienced the worst financial result in its history. Our view of the economic aspect of sustainability therefore finds expression in our prime objective for 2009 – returning UBS to sustainable profitability. Based on the crucial steps already taken to stabilize the firm's finances, our strategy and activities in 2009 are determined by this central goal.

In 2008, we identified key areas requiring change within UBS – including corporate governance, risk management and control processes, the liquidity and funding framework and management compensation – and set in motion a transformation of the bank. One of the fundamental steps was to adopt a new business model: the firm now operates as a Group with autonomous business divisions. Financial sustainability is an essential element of this new model in that it enhances the incentive for each business division to succeed on its own merits, without relying on capital and funding rate cross-subsidies from the other businesses. UBS will continue its program of strengthening its financial position in 2009 by further reducing risk positions, risk-weighted assets, total assets and operating costs. This will enable us to focus management and other resources on securing and building the firm’s core client businesses.

A number of additional changes are already planned for 2009, including the introduction of a new compensation model for senior executives. The model is designed to better align senior management compensation with shareholder interests and incentivize sustainable value-creation. Furthermore, the compensation of management within business divisions will encourage the responsible and independent management of their balance sheets.

To meet client needs and deliver results, UBS relies on the expertise, talent and commitment of its employees. Engaging, developing and retaining a high-value workforce are therefore vital. Currently, the financial crisis – and the concomitant restructuring of our firm – has necessitated reducing our staff. By the end of 2008 headcount in our Investment Bank division had been cut by approximately a quarter from its peak in the third quarter of 2007. Additional reductions in 2009 will bring staff down to 15,000 by year's end. These reductions notwithstanding, UBS continues to judiciously invest in its personnel to ensure that the firm has the range of skills and experience necessary to meet client needs now and to grow the firm when market conditions improve.

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Rebuilding reputation and trust

One of our key priorities for 2009 is the rebuilding of our reputation and recognition in our home market. As part of this process we have, in February 2009, restructured our Global Wealth Management & Business Banking division and introduced a unit, Swiss Bank, to look after our wealth management and private clients in Switzerland and enhance our services for small and medium-sized enterprises, sole proprietors and professionals.

In February 2009 we also announced that UBS had settled the US cross-border case with the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) by entering into a Deferred Prosecution Agreement (DPA) with the DOJ and a Consent Order with the SEC. As part of these agreements, we will complete our previously announced exit of its US cross-border business and implement a program of internal controls to ensure compliance with the Qualified Intermediary Agreement with the Internal Revenue Service. This episode shows clearly the importance of a robust control framework and of making certain that people who work for our firm are incentivised, in the broadest sense, to do the right thing. We remain determined to continue to strengthen the culture of the firm to make sure that the mistakes of the past are not repeated and, with time and the appropriate actions, restore the reputation of UBS.

Rebuilding our reputation includes a re-orientation towards our roots and heritage, a return – in broader terms – to fundamentals. In this context the UBS values, revised in late 2008 to reflect key priorities the firm has set itself, are of major importance as they set out our commitment to the firm's stakeholders. Achieving business success for our shareholders, ensuring client satisfaction, promoting meritocracy and diversity for and among our employees, and being a responsible corporate citizen are key foci and priorities reflected in them.

By heeding the UBS values as well as the UBS Code of Business Conduct & Ethics, management and employees make possible a return to long-term, sustainable growth for the firm based on a strong ethical foundation. Sustainable growth must be achieved in a responsible manner, and our employees must uphold the law, respect regulations and behave in a principled way. UBS is committed to ensuring fair treatment of all its stakeholders while recognizing that conflicts of interest cannot always be avoided.

In relation to societal risks and concerns, UBS has established processes and commitments in place. Our ability to promote and respect relevant standards depends, however, on the nature of our relationship with the various stakeholders with whom we engage. UBS has well-established human resources policies and practices that apply to our employees, our central sphere of influence. With regard to our suppliers, UBS has developed a supply chain guideline, which provides group-wide guidance on identifying, assessing and monitoring supplier practices in the areas of human and labor rights, the environment and corruption. UBS's influence is more limited with regard to clients. However, these limitations notwithstanding, UBS takes its responsibility to preserve the integrity of the financial system seriously. The firm has developed extensive policies designed to prevent, detect and report money laundering, corruption and terrorist financing. In addition, UBS seeks to identify, manage and control environmental and social risks in its business transactions.

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Societal commitments

Sustainable profitability also benefits wider society in that it provides the foundation for our continued societal commitments. In the environmental sphere, our climate change strategy, launched in 2006, represents a key commitment. In 2009, we will continue to advance towards our goal of reducing the firm's CO2 emissions by 40% below 2004 levels by 2012.

In the social sphere, UBS, together with its employees, seeks to enhance the well-being of the local communities in which it is active. We do this through our well-established community affairs program. Building on the solid level of employee volunteering, a priority for 2009 is to encourage even more employees to participate in the volunteering opportunities offered by the firm.

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