6. LIQUIDITY RISK (CONTINUED) 6.3 Management of Liquidity Risk (continued) Stress testing and scenario analysis are important tools used by the Group to manage the liquidity risk. Stress test results are produced regularly to determine the impact of a sudden liquidity shock. The stress-testing provides the Management and BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Group. Another key control feature of the Group’s liquidity risk management is the liquidity contingency management plans. These plans identify the pre-emptive quantitative and qualitative indicators of stress conditions arising from systemic or other crises and provide guidance on actions to be taken in order to minimise the adverse implications to the Group. 7. OPERATIONAL RISK 7.1 Overview Operational Risk is defined as the “risk of loss resulting from inadequate or failed internal processes, people, and systems, as well as from external events which may negatively impact the Group’s financial performance and reputation”. It is inherent in all banking products, activities, processes and systems and the effective management of operational risk has always been a fundamental element of a bank’s risk management programme. 7.2 Operational Risk Governance The Group’s operational risk management (“ORM”) is guided by its ORM Policy, Guideline and Group Enterprise-Wide Risk Management Policy, as well as its Group Risk Appetite Statement Policy which are designed to provide a sound and well-controlled operational environment within the Group. BRC is a committee of Board to oversee the Management’s activities in managing risks for the Group, including operational risk. Its roles, with regard to ORM, include reviewing and recommending ORM Policy, strategies and risk appetite for Board’s approval. MRCC, under the authority delegated by BRC is responsible to perform the oversight function and to ensure effective management of issues relating to operational risk at strategic level. Operational Risk Control Committee (“ORCC”) which is a sub-committee of MRCC is primarily responsible in ensuring effective implementation and maintenance of policies, processes, and systems for managing operational risk for the Group. Notwithstanding the above, the various Business & Support Units (“BU/SU”) are responsible for managing operational risk within their respective domains on a day-to-day basis and ensuring that their business & operational activities are carried out within the established ORM policies, guidelines, procedures and limits. To reinforce accountability and ownership of risk & control at BU/SU level, a Risk Controller (“RC”) for each BU/SU is appointed and Embedded Risk and Compliance Unit (“ERU”) is established at selected BU/SU to assist in driving the risk & control programme for the Group. Ultimately, all staff of the Group are to ensure they properly discharge their day-to-day responsibilities and are wellequipped with the necessary knowledge including the policies and procedures in executing their job functions. This is in line with our Risk Management Tagline, i.e., “Managing Risk is Everyone’s Business”. 461 www.bankislam.com 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS
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