Risk Management

Risk Management Overview

1. Introduction:

The Board of Directors (BOD) and the senior management of our Shwe bank recognize that an effective risk management system must be in place to mitigate various risks to the bank operations.

The purpose of having an effective risk management system is to ensure that:

Individuals who take risk or manage risks clearly understand it
The individual entity and the Bank’s risk exposure is within the limits established by the BOD
Risk taking decisions are in line with the business strategies and objectives set by the BOD.
The expected returns versus rewards compensate for the risk taken
Risk taking decisions are explicit and clear
Sufficient capital is available to take on additional risk.

The risk management department at our Shwe bank plays a critical role in safeguarding the institution’s financial stability and reputation while ensuring compliance with regulatory requirements. Amidst a dynamic and evolving financial landscape, our commitment to robust risk management practices remains unwavering.

2. Risk Governance:

The BOD and the senior management of our Shwe bank are responsible overall for ensuring that adequate policies are put in place to manage and mitigate the adverse effects of all risk elements in the Banking operations.

To ensure effective monitoring and control over risks, the departments responsible for risk review, internal audit and compliance are independent from the risk-taking departments and report directly to the BOD and Audit & Risk Management Committee (ARMC).

At our Shwe Bank, risk governance is underpinned by a clear organizational structure. Our committee oversees the identification, assessment, and management of risks across the bank, ensuring alignment with strategic objectives and regulatory expectations. During the reporting period, we continued to enhance our risk management framework to strengthen oversight and decision-making processes.

3. Roles & Responsibilities:

Board of Directors

The BOD comprising the Executive Chairman and Board members shall be responsible to define the SHWE Bank’s overall strategic direction and tolerance level of each identified key risk element facing the Bank.

Audit and Risk Management Committee (ARMC)

The committee shall be appointed by the BOD. The ARMC shall be responsible for the following:

To formulate policies relating to risk management consistent with the strategic direction and overall risk appetite set by the BOD.
To ensure that the senior management operate within the risk tolerance limits set and to recommend changes as and when appropriate in line with any significant changes in the internal and external environment.
Monitor and regular review of the effectiveness of RMF

Risk Management Department (RMD)

The RMD shall be headed by a Head, Risk Management and reporting directly to the Chief Executive Officer with dotted line reporting to the ARMC.

The RMD shall be responsible for the following;

To develop and maintain the Risk Management Framework for SHWE Bank
To develop and implement comprehensive risk management policies and procedures at SHWE Bank.
To monitor and ensure the RMF is being adopted and implemented throughout all functions at SHWE Bank
To create risk awareness and ensure risk culture is embedded in all levels of the Bank’s operations that face risk in any form or manner.
To identify, establish and communicate to all, clear lines of roles and responsibilities in respect of risk management accountability in each department, business and functional lines in the Bank
To establish systems and procedures to perform the risk management process.
To implement the risk management process, policies and procedures which will include risk identification, risk evaluation and analysis, risk monitoring & mitigation and risk control.
To jointly develop the individual key risk policies and guides with the respective business and functional units and recommend to the BOD and ARMC for approval.
To establish the risk parameters on each of the key risk elements identified by the BOD & ARMC.
To review the risk management process periodically and perform enhancements where necessary, to ensure its effectiveness and relevance in line with the changing conditions, either internally or externally, and the risk profile of the Bank.
To ensure that the key risk elements identified remain within the tolerance limits set by the BOD and ARMC.
To report any breaches on the set risk parameters and tolerance limits.
To implement remedial measures to address the identified deficiencies and problems that may arise.
To provide guidance and direction to the staff responsible for taking risks.
To develop an effective management information system to ensure an accurate and timely flow of information from the operational level to the BOD and ARMC.

Risk Managers

Risk Managers reporting to the Head, Risk Management shall be responsible to coordinate the implementation of the risk management process in the individual entity. He or she should assist in providing the guidance and tools for implementing risk management at the respective business and functional departments and report the progress on a periodic basis. He or she shall be responsible for the following:

To assist the business and functional departments in risk identification, risk evaluation and analysis, risk monitoring and mitigation and risk control functions at their respective business and functional areas.
To collate reports from all departments and escalate risk management issues and any breaches of the risk policies and procedures to the RMD
To collate reports from all Departments on any breach of tolerance limits set for each of the identified key risk element on a periodic basis to RMD
To collate reports from all Departments on the risk monitoring and mitigation plans and controls implemented to mitigate the identified risk to the RMD

Chief Executive Officer (CEO)

The CEO shall be the driving force with respect to all risk matters at their respective Banks/entities.

The CEO shall be responsible for the following:

To drive risk awareness in the Bank.
To ensure a risk culture atmosphere embedded in all levels of the organization in the Bank.
To ensure the risk policies and procedures laid down by the ARMC are implemented diligently, effectively and timely.
Be accountable to all material and key risk elements identified are managed within the tolerance limit set by ARMC.

Business Heads and Functional Department Heads

These Business and Functional Heads shall be directly involved and be responsible for complying with the risk management process at their respective Departments.

They shall be responsible for the following:

To perform risk identification, risk evaluation and analysis, risk monitoring and mitigation and risk control functions at their respective business and functional areas.
To report and escalate risk management issues and any breaches of the risk policies and procedures
To report any breach of tolerance limits set for each of the identified key risk element on a periodic basis
To report on the risk monitoring and mitigation plans and controls implemented to mitigate the identified risk.
To continuously seek out new risks that may arise due to changes in either the internal or external environment that affect the Bank.

Asset and Liability Management Committee (ALMC)

The ALMC shall have responsibilities to manage the assets and liability of the Banking’s balance sheet. The members of the committee shall be appointed by the BOD.

The ALMC shall be responsible for the following:

To report to the BOD and ARMC on risk matters in respect of book risk, exchange or currency risk and liquidity risk management
To develop, review and amend the asset & liability strategies to be consistent with the overall BOD strategic policy in respect of asset and liability management.
To develop the investment, hedging, gapping & pricing strategy
To inform the BOD on any major developments and changes in the policies and regulations in the respective countries that will affect Asset and Liability Management.

Reporting Lines

The reporting lines of the respective Committees, Departments, key senior management, Business and Functional lines are summarized as follows:

Risk Appetite and Strategy:

Our risk appetite framework articulates the level of risk that our Shwe Bank is willing to accept in pursuit of its strategic objectives. We maintain a prudent risk appetite that balances growth aspirations with the preservation of capital and liquidity. Our risk strategy emphasizes diversification, disciplined underwriting standards, and proactive risk monitoring to mitigate potential exposures.

Risk Assessment and Measurement:

Throughout the reporting period, we utilized advanced analytics and risk models to assess and measure various types of risks, including credit risk, market risk, liquidity risk, operational risk, and compliance risk. Our risk assessments revealed a stable risk profile overall, with exposures remaining within acceptable tolerances. Notable improvements were made in data analytics capabilities, enhancing our ability to identify emerging risks and trends.

Risk Mitigation and Controls:

Our Shwe Bank employs a comprehensive set of risk mitigation strategies and controls to address identified risks effectively. We continued to invest in technology and infrastructure to strengthen our control environment and enhance resilience against potential threats. Despite the challenging operating environment, our risk management efforts resulted in the timely detection and mitigation of risks, minimizing the impact on the bank’s performance.

Regulatory Compliance:

Compliance with regulatory requirements remains a top priority for our Shwe bank. We closely monitored regulatory developments and implemented necessary changes to ensure ongoing compliance with applicable laws and regulations. Our interactions with regulators remained constructive, with no material findings or issues reported during regulatory examinations. We remain committed to maintaining a culture of compliance and transparency across the organization.

Review of the Risk Management Framework:

We review regularly to ensure it is effective and relevant to the current environment and in line with the growth and complexities of the Bank at least once a year.

Conclusion:

In conclusion, the risk management department at our Shwe bank continues to play a pivotal role in safeguarding the institution’s financial stability and reputation. Looking ahead, we anticipate continued focus on enhancing risk governance, leveraging data analytics for better risk insights, and adapting to evolving regulatory requirements. Through proactive risk management practices and a commitment to excellence, we are well-positioned to navigate the uncertainties of the future and deliver sustainable value to our stakeholders.

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