Risk management in a business is an integral part of the corporate culture and ensures the financial reliability of the firm in order to achieve the strategic goals set by the shareholders. To learn if risk management is needed on non profit firms, please read Nonprofit risk management.
The firm’s risk management system is based on the recommendations of the Basel Committee on Banking Supervision, the National Bank of the Republic of Belarus and the development of international banking practice in this direction.
The risk management system formed in the Bank is based on the following basic principles:
The Bank is aware of all the main risks inherent in banking. Decisions on the conduct of any operation (transaction) are made after a comprehensive analysis of the risks arising from such an operation (transaction). Each employee of the Bank is aware of the risk management system in place in the Bank and participates in the risk management process within the framework of their job duties.
The principle of adequacy
The organizational structure formed in the Bank, the applied procedures and risk management tools are adequate to the scale and complexity of the banking operations and other activities. The level of approval of the operation (transaction) depends on the amount of inherent risk (the higher the risk, the higher the level of decision making about the possibility of its execution).
The principle of distribution of responsibility
The Bank ensures the constant participation of management bodies in the organization and operation of the risk management system, as well as a clear distribution of powers for risk management and responsibility between the Supervisory Board, the Risk Committee of the Supervisory Board, the Audit Committee of the Supervisory Board, the Management Board, other collegial bodies and officials of the Bank, the risk management division, divisions generating risks, and interaction between all the specified participants in the risk management process.
The principle of continuity and integration
Risk management is a continuous process integrated into business processes by including control operations in them to prevent violation of established restrictions on the level (amount) of risk, as well as to monitor the actual level (amount) of risk.
The principle of independence
The bank has a risk management subdivision, which is independent of the subdivisions that generate risks, which is ensured by its direct subordination to the official responsible for risk management in the Bank, who is directly subordinate to the Chairman of the Management Board.
The principle of complexity
The Bank ensures the formation of a comprehensive system for managing risks that may have an impact on the Bank’s activities. The coordination of all risks management activities of the Bank is carried out by the risk management subdivision.
The Bank forms a management reporting system on the functioning of the risk management system and the level (value) of risks, through which the Bank’s management bodies are informed at a specified frequency.
The principle of improvement
The Bank is constantly improving the risk management system, taking into account the results of periodic assessments of its effectiveness.
The Bank in its activities faces the main types of banking risks, such as credit risk, country risk, market risk, interest rate risk of the banking portfolio, liquidity risk, operational risk, strategic risk, risk of loss of business reputation, concentration risk.