SHARIAH GOVERNANCE We had approved in our meetings several initiatives undertaken by the Bank in strengthening its Shariah governance, including the review of the Shariah Compliance Policy of Bank Islam Labuan Offshore Branch (“BILOB”), Terms of Reference and Charter of the SSC. Such initiatives aimed, among others, to set out the Shariah governance framework within the Bank to ensure the business operations of the Bank were in line with the Shariah rules and principles. SHARIAH RISK MANAGEMENT (“SRM”) We had observed that the Bank continuously implemented appropriate measures in managing its Shariah non-compliance (“SNC”) risks. One of the significant measures was the implementation of Risk Control Self-Assessment (“RCSA”) which aimed to assess the significance of identified SNC risks and the effectiveness of the controls put in place within the respective functional areas. Since the introduction of RCSA, a continuous process of identifying and assessing SNC risks at various functional areas has been carried out by all Risk Controllers (“RCs”). The RCs have been also responsible for driving and implementing appropriate controls to mitigate any SNC events while achieving the business objectives of their respective areas. The semi-annual RCSA results, specifically on the SNC risk exposures of the Bank, were duly tabled in the Management Risk Control Committee and then in our SSC meetings for monitoring and oversight purposes. In addition, the enhancement undertaken for the Operational Risk Integrated System (“ORIS”) which was launched in 2022, encompassing the Shariah compliance elements on top of the Operational Risk and Business Continuity Management. The enhancement made focused on the effectiveness of system application and data completeness to further improve the management of risk profiles for all business and support units, ultimately reducing the probability of SNC or Shariah-related events. SRM also acknowledges the importance of promoting a strong Shariah compliance risk culture within the Bank, by instilling and promoting compliance with Shariah operations, business, affairs, and activities. On that note, this year SRM had revised the mandatory e-learning modules for better quality and efficiency, together with a refresher program for new and existing staff which focused on SNC Risk Management. The refresher program was made mandatory to all staff of the Bank. Further to this, the SRM came up with a revised Shariah-Related Complaint Checklist to accommodate more effective identification and assessment of risk by the frontliners. Accordingly, the Key Risk Indicators (“KRI”) Reporting Frequency for Number of Shariah Related Complaints and its threshold was also revised to be in line with the new requirement under BNM ORR Policy Document (effective 1 November 2023). Finally, during RCSA exercise in 2023, SRM emphasized on the Generic Risk proposed in previous year: Risk of failure to implement latest Shariah decisions or documents approved by SSC/Group Shariah Division which would lead to Shariah noncompliance event. The Generic Risk promoted greater accountability on the Bank’s staff in observing and practicing Shariah requirements and eventually inculcating the Shariah risk culture in a more efficient manner. SHARIAH REVIEW & SHARIAH AUDIT The Shariah Review and Shariah Audit functions play a vital role in ensuring Shariah compliance by evaluating and assessing operations, business, affairs and ongoing activities in the Bank. Shariah Review function is performed by the Shariah Compliance Department under Group Compliance Division. The Shariah Compliance Department is responsible to conduct regular assessment and validation on the Bank’s compliance with Shariah requirements in its operations, business, affairs and ongoing activities, including new products and services implementation alongside adherence with relevant regulatory requirements. The Shariah Audit Department is under the Group Internal Audit Division and is responsible to provide an independent assessment on the quality and effectiveness of the Bank’s internal control, risk management systems, governance process, and the overall compliance of the Bank’s operations, business, affairs and activities with Shariah. Both Shariah Review and Shariah Audit plans for the financial year were reviewed and noted by us for their implementation. Their completed reports were presented and deliberated in our SSC meetings to confirm that the Bank had complied with the applicable rulings issued by the Shariah Advisory Council (“SAC”) of Bank Negara Malaysia, the SAC of Securities Commission (for capital market-related matters) and our decisions. Throughout the year, the Shariah Review and Shariah Audit exercises conducted covered the following entities/areas: 256 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023 Report of the Shariah Supervisory Council
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