RISK MANAGEMENT REPORT
One of the key missions of AfrAsia Bank Limited (the ‘Bank’) is to identify, assess and manage the credit, operational, market and liquidity risks to which the Bank is exposed, thereby providing a sustainable environment to attract and promote business opportunities whilst improving the risk/return profile of its activities.
Through a robust internal control mechanism together with comprehensive and up-to-date risk policies, reliable decision making support with strict adherence to the legal and regulatory requirements, the Bank’s goal remains to maintain the confidence of stakeholders by mitigating its risk through the management of current and potential credit, operational, market and liquidity risks.
RISK MANAGEMENT STRUCTURE
AfrAsia Bank Limited has clear risk management objectives and a well-established strategy to deliver them, through core risk management processes.
At a strategic level, our risk management objectives are to:
- identify the significant risks to the Bank
- formulate the Bank’s risk appetite and to ensure that business profiles and plans are consistent with it
- establish strong and independent reviews in a dynamic structure, optimisation of risk and return decisions are taken as closely as possible to business
- ensure the business growth plans are properly supported by effective risk infrastructure, and
- ensure that the management of risk profile for specific financial deliverables remain possible under a range of adverse business conditions.
The Bank’s main approach is to establish a solid and effective Risk Management infrastructure, in terms of people, systems, policies, procedures, control and compliance and to recommend changes to the Board to meet the challenges of the dynamic market.
The Bank also has a clear organisational structure besides comprehensive policies and procedures to identify, evaluate, monitor and control assorted risks across the organisation. Reviews and modifications to these risk management policies and procedures are regularly carried out to reflect changes in markets and business strategies.
The Board has delegated some of its functions to a number of committees and departments as follows:
The Board Risk Committee performs several fundamental functions for the Bank which include:
- approving the delegation of credit limits to management and approving any transactions exceeding those delegated authorities
- reviewing and recommending for Board approval the Bank’s Risk Appetite Framework at least annually and reviewing the alignment of the Bank’s strategic plan with the Risk Appetite Framework
- reviewing and approving risk management policies recommended by Bank management for identifying, accepting, monitoring, managing and reporting on the significant risks to which the Bank is exposed; as part of such reviews, satisfy itself with the manner in which material exceptions to such policies are identified, monitored, measured and controlled, as well as the remedial actions taken when exceptions are identified
- reviewing and recommending for Board approval the Bank’s credit risk strategy at least annually
- reviewing, monitoring and recommending to the Board for approval of risk related policies, procedures and standards as required by regulatory agencies
- overseeing the risk management function, having regard to its independence; by periodically reviewing the results of independent reviews of the risk management function and reporting such results to the Board; and overseeing that deficiencies identified related to the risk management function are remedied within an appropriate time frame and reporting to the Board on the progress of necessary corrective actions
- reviewing on a quarterly basis management’s report on the Bank’s lending profile and discussing identified material risks and emerging risk issues and trends with management
- reviewing quarterly reports on the Bank’s enterprise-wide risk profile (including credit, market, operational and liquidity risks) and reviewing against its risk appetite
- reviewing and approving country limits in line with the Bank’s strategy and country appetite, and
- reviewing and approving any other matters required by regulators from time to time
Regular reporting enables the Board of Directors to monitor whether the overall risk policies and authorities are being complied with and whether they meet the Group’s needs. In addition, the Board regularly reviews reports analysing the Group’s portfolio, including data on industry concentrations.