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NOTESTOTHEFINANCIALSTATEMENTS
31 DECEMBER 2013
37. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
b. Market risk
Market risk refers to the potential loss arising from adverse movements in the market variables such as market rate,
foreign exchange’s rate, equity price and commodity price. In other words, it is the risk that the Group’s and the Bank’s
earnings or capital position will be affected by fluctuation in market rates or prices.
c. Asset liability management risk
Asset Liability Management (ALM) risk comprises:
(i) Interest rate risks
This refers to the exposure of the Group’s and the Bank’s financial condition due to adverse movements in
interest rates.
(ii) Liquidity risks
Defined as the risk of not being able to obtain sufficient funds in a timely manner at a reasonable cost to meet
financial commitments when due.
d. Credit risk
Credit risk is defined as risk due to uncertainty in the customers or the counterparties ability to meet its obligations or
failure to perform according to the terms and conditions of the credit-related contract.
Oversight and organisation
A stable enterprise-level organisational structure for risk management is necessary to ensure a uniform view of risk across
the Group and the Bank. It is also important to have clear roles and responsibilities defined for each functions.
The Board of Directors has the overall responsibility for understanding the risk undertaken by the Group and the Bank and
ensuring that the risk are properly managed.
While the Board of Directors is ultimately responsible for risk management of the Group, it has entrusted the Board Risk
Committee (“BRC”) to carry out its functions. Although the responsibilities have been delegated, the Board still remains
accountable. BRC, which is chaired by an independent Director of the Board, oversees the overall management of all risks
covering credit risk management, country risk management, market risk management, asset liability management and
operational risk management.
Executions of the Board’s risk strategies and policies are the responsibilities of the Group’s and the Bank’s management
and the conduct of these functions are being exercised under a committee structure, namely Management Risk Committee
(“MRC”). The President/Chief Executive Officer chairs MRC. The Committee focuses on the overall business strategies and
daily business operations of the Group and the Bank in respect of risk management.
To carry out the day-to-day risk management function, a dedicated Risk Management Division (“RMD”) that is independent of
profit and volume targets supports the Committee. RMD reports functionally to the BRC and administratively to the President/
Chief Executive Officer.
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EXIM Bank Annual Report 2013