STRESS TESTING The Group undertakes periodical stress tests across its entire portfolio of credit, market, liquidity and non-financial risk in order to ensure that the Group remains viable even under severe, i.e., exceptional but plausible stress conditions. Under specific circumstances, ad-hoc stress tests may also be conducted to assess the impact of observed deterioration in its business environment which the Group has not taken into account. The Group also considers emerging risks and other stress events that could materialise over the next one (1) to three (3) years (if any). The Group will then assess the potential impact of such events at various levels of severity and deliberate the outcome at Management and Board Committees. RISK CULTURE Risk and compliance culture is a vital component in strengthening risk governance and forms a fundamental principle of strong risk management. It is key to the long-term effectiveness of the Group’s risk management strategy. As encapsulated in the Group’s Risk Management Tagline, “Managing Risk is Everyone’s Business”, building a strong risk and compliance culture is the responsibility of the Board, Management and all employees of the Group. To ensure this, the risk management process and approach has been embedded in all the Group’s core business processes, functions and activities. The Group’s risk culture evolves over time and is a reflection, amongst others, of Management actions, effective enforcement of policies and guidelines and communication strategies. Additionally, the Group perceives risk management as an important means of enhancing competitiveness, performance and operational resilience. As part of the risk and compliance culture, the Board, Management and employees of the Group are committed to adhering to the requirements of relevant laws, rules and regulations. Risk and compliance programmes are emplaced and driven by the Board and Management encompassing, among others e-learning, induction programmes and engagement sessions. The Group takes steps to ensure that trigger levels, limit structures and delegated authorities are re-aligned and potential risk appetite implications are considered in all major resource allocation decisions. In setting the risk appetite of the Group and to enhance the Group’s risk adjusted returns, the discussion of risks is from the point of view of optimising the Group’s risk-return profile instead of ‘loss minimising’. Guided by these principles, our risk appetite is articulated through a set of Risk Appetite Statements across the Group to ultimately balance the strategic objectives of the Group. RISK MANAGEMENT PROCESS A standard risk management process has been adopted by the Group to ensure that Group-wide risks are properly identified and managed across all products and activities undertaken in a structured, systematic and consistent manner. The risk management process is as follows: Under this approach, active involvement of the Board, Management and staff of all levels are required in the risk management process to ensure a uniform view of risks across the Group. RISK MANAGEMENT PROCESS Step 1: Risk Identification Step 2: Risk Assessment Step 4: Risk Monitoring & Reporting Step 3: Risk Control & Mitigation 235 1 2 3 4 5 6 7 8 9 www.bankislam.com ACCOUNTABILITY
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