Annual Report 2015
117
21 RISK MANAGEMENT
21.1 Introduction
The Group’s prudent banking practices are founded on solid risk management. In an effort to keep apace with its dynamic
environment, the Group has established a comprehensive framework for managing risks, which is continually evolving as the
Group’s business activities change in response to market, credit, product and other developments.
The basic principles of risk management followed by the Group include:
- Managing risk within parameters approved by the Board of Directors and Executives;
- Assessing risk initially and then consistently monitoring those risks through their life cycle;
- Abiding by all applicable laws, regulations and governance standards in every country in which we do business;
- Applying high and consistent ethical standards to our relationships with all customers, employees and other
stakeholders; and
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Undertaking activities in accordance with fundamental control standards. These controls include the disciplines of
planning, monitoring, segregation, authorisation and approval, recording, safeguarding, reconciliation and valuation.
The Board of Directors has ultimate responsibility for the management of risk within the Group. Acting with authority delegated
by the Board, the Credit, Audit, Asset/Liability Committee and Other Risks Committees, review specific risk areas.
The Internal Audit function audits Risk Management processes throughout the Group by examining both the adequacy of
the procedures and the Group’s compliance with these procedures. Internal Audit discusses the results of all assessments
with Management and reports its findings and recommendations to the Audit Committees of the Parent and respective
subsidiaries.
The Group’s activities are primarily related to the use of financial instruments. The Group accepts funds from customers and
seeks to earn above average interest margins by investing in high quality assets such as government and corporate securities as
well as equity investments and seeks to increase these margins by lending for longer periods at higher rates, while maintaining
sufficient liquidity to meet all claims that might fall due.
The main risks arising from the Group’s financial instruments are credit risk, interest rate and market risk, liquidity risk, foreign
currency risk and operational risk. The Group reviews and agrees policies for managing each of these risks as follows:
21.2 Credit risk
Credit risk is the potential that a borrower or counterparty will fail to meet its stated obligations in accordance with agreed
terms. The objective of the Group’s credit risk management function is to maximise the Group’s risk-adjusted rate of return by
maintaining credit risk exposure within acceptable parameters. The effective management of credit risk is a key element of a
comprehensive approach to risk management and is considered essential to the long-term success of the Group.
The Group’s credit risk management process operates on the basis of a hierarchy of discretionary authorities. A Board Credit
Committee, chaired by the Chairman of the Board and including executive and non-executive directors, is in place, with the
authority to exercise the powers of the Board on all risk management decisions.
The Risk Management unit is accountable for the general management and administration of the Group’s credit portfolio,
ensuring that lendings are made in accordance with current legislation, sound banking practice and in accordance with the
applicable general policy of the Board of Directors. The Risk Management function is kept separate from and independent of the
business development aspect of the operations.
