Board Integrated Risk Management Committee Report
Composition of the Committee
Board Integrated Risk Management Committee (the BIRMC) consists of following Board members, whose profiles are given on pages 14 to 19.
Mr M P Jayawardena*
Mr S Renganathan
(Managing Director/Chief Executive Officer)
Appointed w.e.f. July 30, 2018
Mr J Durairatnam
Retired w.e.f. July 26, 2018
Mr S Swarnajothi*
Mr K Dharmasiri*
Mr L D Niyangoda*
Mr T L B Hurulle*
Regular attendees by invitation
Mr S C U Manatunge
(Director/Chief Operating Officer)
Appointed w.e.f. July 30, 2018
Mr V S Rajasooriyar
Mr K S A Gamage
(Assistant General Manager – Information Technology)
Secretary to the Committee
Mr K D N Buddhipala
(Chief Financial Officer)
*Independent Non-Executive Director
Attendance at Meetings
||Eligible to attend/
|Mr M P Jayawardena
|Mr S Renganathan
|Mr J Durairatnam
|Mr S Swarnajothi
|Mr K Dharmasiri
|Mr L D Niyangoda
|Mr T L B Hurulle
|Mr S C U Manatunge
During the year under review, BIRMC held four (4) meetings on a quarterly basis and one additional meeting specifically to discuss and recommend Internal Capital Adequacy Assessment Process (ICAAP) as at December 31, 2017. The proceedings of the Committee meetings are reported to the Board of Directors.
Range of risk issues deliberated for the Group during 2018 included strategic growth, market and price volatility, operational performances, competition, compliance, and emerging trends.
Charter of the Committee
The BIRMC has been established by the Board of Directors, in compliance with the Section 3 (6) of the Direction No. 11 of 2007, on “Corporate Governance for Licensed Commercial Banks in Sri Lanka”, issued by the Monetary Board of the CBSL under powers vested in the Monetary Board, in terms of the Banking Act No. 30 of 1988. The composition and the scope of work of the Committee are in line with the same, as set out in the BIRMC Charter which was reviewed during December 2018, and clearly sets out the membership, authority, duties and responsibilities of the BIRMC as described in the “Risk Management” section of this report on pages 115 to 139.
The BIRMC assists the Board of Directors in fulfilling its responsibilities for overseeing the Bank’s risk management framework and activities, including the review of major risk exposures and the steps taken to monitor and control those exposures pertaining to the myriad of risks faced by the Bank in its business operations. Duties of the BIRMC include determining the adequacy and effectiveness of such measures, and to ensure that the actual overall risk profile of the Bank conforms to the desirable risk profile of the Bank, as defined by the Board.
All key risks such as credit, operational, market, liquidity, information technology, strategic, etc. are assessed by the BIRMC regularly through a set of defined risk indicators. The Committee works closely with KMP and the Board in fulfilling its statutory, fiduciary, and regulatory responsibilities for risk management. The risk profile of the Bank is communicated to the Board of Directors periodically through the Risk Assessment report submitted to the Board following each BIRMC meeting.
Activities in 2018
In discharging the above duties and responsibilities vested on the BIRMC, the Committee reviewed significant risks comprising of strategic, operational, credit, market, cyber and other emerging risk categories during the year. The activities carried out by the Committee include below:
- Improvements were recommended to the Bank’s risk management framework and related policies and procedures as deemed suitable, in consideration of anticipated changes in the economic and business environment, including consideration for emerging risks, legislative or regulatory changes and other factors considered relevant to the Group’s risk profile.
- Approval of parameters and limits set by the Management against various categories of risk upon ascertaining that they are in accordance with the relevant laws and regulations as well as the desired policy levels stipulated by the Board of Directors.
- Reviewed periodic reports from the Management on the metrics used to measure, monitor and manage risks, including acceptable and appropriate levels of risk exposures. The reviews covered movements from inherent to residual risk levels which indicate the progress in implementing controls and assessing the effectiveness of measures for addressing the sources of risk.
- The key risk indicators designed to monitor the level of specific risks were reviewed regularly, with a view of determining the adequacy of such indicators to serve the intended risk management objectives and took proactive measures to control risk exposures. The actual results computed monthly were reviewed against each risk indicator and prompt corrective action was initiated to mitigate the effects of specific risks, in case such risks exceeded the prudent thresholds defined by the Board of Directors.
- Reviewed and revised the Terms of Reference of all Management Committees dealing with specific risks or some aspects of risk, such as the EIRMC, ECMN, CPC, ISC, ALCO, etc. Actions initiated by the Senior Management were monitored periodically to verify the effectiveness of the measures taken by these respective committees.
- Local and global macroeconomic factors were discussed with a view to identify impact of such factor related changes on the banking sector as a whole and the Bank, in order to initiate remedial action in a proactive manner.
- The annual work plans, related strategies, policies and frameworks of the above committees were reviewed, to ensure that these committees have a good understanding of their mandates and adequate mechanisms to identify, measure, avoid, mitigate, transfer or manage the risks within the qualitative and quantitative parameters set by the BIRMC.
- Based on the observations and recommendations of the BIRMC, the existing model used for rating Lending Units on their performance level under credit risk review was revamped and further fine-tuned to highlight risk concerns.
- Reviewed and approved the ICAAP results related to Commercial Bank Group entities to ensure that the Group maintains an appropriate level and quality of capital in line with the risks inherent in its activities and projected business performance.
- Findings from the biannual Risk Control Self Assessment (RCSA) exercise were reviewed.
- Monitored the effectiveness and the independence of the risk management function within the Bank and ensured the adequacy of resources deployed for this purpose.
- Initiated appropriate action against failures of the risk owners through the Management, in order to improve the overall effectiveness of the risk management of the Bank.
- Reviewed the effectiveness of the compliance function, to assess the Bank’s compliance with laws, regulations, regulatory guidelines, internal controls, and approved policies in all areas of business operations.
- The risk profiles of the subsidiaries of the Bank were monitored through periodic review of key risk indicators and comprehensive annual risk reviews.
- Conducted the annual review of the adequacy of Business Continuity and Disaster Recovery plans of the Bank, in line with the statutory requirements.
- The BIRMC members participated in knowledge enhancing session covering technology risk resilience and anti-money laundering compliance challenges, conducted by the CBSL.
During the year 2018, the BIRMC supported execution of the overall business strategy within a set of prudent risk parameters that
are reinforced by an effective risk management framework.
M P Jayawardena
Chairman – Board Integrated Risk Management Committee
February 22, 2019