7. OPERATIONAL RISK (CONTINUED) 7.4 ORM Tools & Mitigation Strategies (continued) As part of the risk transfer strategy, the Group obtains a 3rd party Takaful coverage to cover for the Group’s high impact loss events. The Group also ensures that the group-wide Operational Risk awareness programme is conducted on an ongoing basis. This training programme emphasises on inculcating an operational risk culture among staff, effective implementation of ORM tools, fraud awareness, BCM and other aspects of ORM. 7.5 Capital Treatment for Operational Risk Operational Risk capital charge is calculated using the BIA as per BNM’s CAFIB. The BIA for operational risk capital charge calculation applies an alpha (15%) to the average of positive gross income that was achieved over the previous three years by the Group. The RWA amount is computed by multiplying the minimum capital required with a multiplier of 12.5 (reciprocal of 8%). 8. SHARIAH GOVERNANCE 8.1 Overview By virtue of BNM’s Shariah Governance Policy Document (“SGPD”), the Group has established a sound and robust Shariah governance framework with the emphasis placed on the roles of its key functionalities, which include having in place an effective and responsible Board and Management and an independent Shariah Supervisory Council (“SSC”) that is supported by strong and competent internal Shariah functions. As part of the robust Shariah governance framework, to date, the Group has put in place the Group Shariah Compliance Policy, Shariah Compliance Guideline, Shariah Compliance Marketing Guideline, Business Zakat Guideline and Charity Fund Management Guideline. These help to ensure the Group’s business activities and behaviors are in compliance with Shariah rules and principles, provisions of the Islamic Financial Services Act (“IFSA”) 2013, BNM’s SGPD and its other rules and regulations, and the resolutions of BNM, Securities Commission (“SC”) and Labuan Financial Services Authority (“LFSA”)’s Shariah Advisory Council and the SSC. 8.2 Shariah Risk Management The Group’s Shariah risk management as part of operational risk management is guided by Operational Risk Management (“ORM”) Policy and Guidelines which set out the high-level framework supporting the Shariah Compliance Policy and detail out the Shariah risk management processes and tools. The policy and guidelines serve to provide a consistent group-wide framework for managing SNCR across the Group. In addition, the Group Risk Loss Event Management and Reporting (‘’RLEMR”) Guideline provides sound mechanism on Shariah non-compliance (“SNC”) management and reporting, in order to ensure the Group strictly complies with Shariah rules and principles, as well as the regulatory requirements. The guideline has been established to be in line with the mechanism set out by BNM Operational Reporting Requirement (ORR) Policy Document (effective 1 November 2023) and to ensure compliance with section 28(3) of the IFSA 2013 which requires any SNC event to be immediately reported to BNM. Pursuant to this guideline, any actual SNC events caused by operational lapses including negligence, breach of policies and lack of due care by staff may be subject to disciplinary action. 464 Pillar 3 Disclosure as at 31 December 2023 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023
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