Risk Management
Governance Structure by Risk Type
Capital and Liquidity Risk

  • Monitoring of liquidity position on a daily/weekly/monthly basis and calibration of liquidity management policies. This entails forecasting of future cash inflows/outflows and ensuring that the Bank can meet the required outflows. The Bank has in place a liquidity management system that enhances the liquidity monitoring capability and ability to stress-test liquidity positions.
  • Regular liquidity stress testing conducted under a variety of scenarios, covering both normal and more severe market conditions with well defined triggers and suggested actions. The Bank runs several scenario-specific stress tests on a monthly basis.
  • Ensuring regular compliance with the liquidity ratios such as ‘Advance to Stable Resources ratio’ stipulated by the Central Bank of UAE. The Bank has expanded the liquidity measurement metrics to include Basel III directives such as Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NFSR).
  • Monitoring composition and managing concentration of funding sources, proportion and concentrations of short-dated wholesale funding, etc.

Retail and Wholesale Banking Credit Risk

  • Defining and ultimately deciding on the Bank’s tolerance for credit risk and the level of returns it expects to achieve for incurring various credit risks. The Bank’s risk appetite policy is a three-year forward-looking document and sets risk boundaries and objectives for a three-year period.
  • Ensuring the development and implementation of the Credit Risk Strategies relevant to each business line, and the policies and procedures for all business segments.
  • Establishing consistent frameworks for risk measurement and monitoring. The Bank has further strengthened its risk systems architecture and has a fully functional global exposure monitoring mechanism.
  • Wholesale Banking Credit Risk is regulated via an upgraded internal rating system and has been strengthed with the use of several risk tools such as (Risk Adjusted Return on Capital) RAROC/counterparty and country thresholds. Retail Risk has further embedded the use of application and behaviour scores in decision making.

Market Risk

  • Establishment of a comprehensive market risk policy framework and a mark-to-market valuation framework.
  • Independent measurement, monitoring and control of market risk. The market risk measurement metrics include several statistical and non-statistical risk measures such as VaR, back testing, net open positions, basis point values, option sensitivities and position concentrations. The scenarios used for interest rate risk assess the change in the portfolio to parallel and non-parallel rate shocks. The non-parallel rate shocks simulate steepening, bending and twisting interest rate scenarios or significant changes in exchange and commodity rates.
  • Ensuring that new product development is subjected to adequate review, challenges, testing and assessment by all key stakeholders, including business, risk, finance, IT and operations, prior to being introduced.

Operational Risk

  • Ensure compliance with regulatory and other legal requirements
  • Documentation of controls and procedures
  • Periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified
  • Reporting of operational losses and proposed remedial action
  • Development and testing of business contingency plans
  • Tracking and monitoring of key risk indicators and developing action plans
  • Control-testing framework