Board Integrated Risk Management Committee Report

Composition of the Committee

The Board appointed Integrated Risk Management Committee (BIRMC), as at the end of the year, comprised of the following members:

Mr. M.P. Jayawardena* (Chairman)
Mr. S. Swarnajothi* (Director)
Mr. K. Dharmasiri* (Director)
Mr. J. Durairatnam – (Managing Director/CEO)
Mr. S.K.K. Hettihamu (Chief Risk Officer)

*Independent Non-Executive Director

Please refer this section for the profiles of the Board members.

Chief Financial Officer functions as the Secretary of the Committee.

Charter of the Committee

The BIRMC was 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, conform to the same as set out in the BIRMC Charter, which clearly sets out the membership, source of authority, duties and responsibilities of the BIRMC, as described in the Section on ‘Managing Risk at Commercial Bank’.

BIRMC assists the Board of Directors in performing its oversight function, in relation to different types of risks faced by the Bank in its business operations and ensures adequacy and effectiveness of the risk management framework of the Bank. The Committee submits a risk assessment report within a week of each meeting to the Board of Directors. 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.

Activities in 2015

BIRMC held 4 Meetings on a quarterly basis, during the year under review and the attendance of Committee Members at meetings is stated in the table 4. The Committee assessed all key risks such as Credit, Operational, Market, Liquidity etc., which are tracked on a monthly basis through a set of risk indicators. It worked very closely with the KMP and the Board, in fulfilling its statutory, fiduciary and regulatory responsibilities for Risk Management.

The Charter of the BIRMC was reviewed by the Board of Directors in December 2015.

In order to discharge the above duties and responsibilities, the Committee carried out the following activities:

• Reviewed and revised the Terms of Reference of all Management Committees dealing with specific risks or some aspects of risk, such as the Executive Integrated Risk Management Committee, the Executive Committee on Monitoring NPLs, the Credit Policy Committee and the Assets and Liabilities Committee.
• Monitored actions initiated by Senior Management, to test the effectiveness of the measures taken by the respective Committees referred to above.
• Reviewed the annual work plans, related strategies, policies and frameworks of the above Committees, to ensure that these Committees have a good understanding of their mandates and adequate mechanisms to identify, measure, avoid, mitigate, transfer or manage risks within the qualitative and quantitative parameters set by the BIRMC.
• Maintained a continuous dialogue with Management Committees, directly or indirectly dealing with specific risks, so that BIRMC is immediately informed of any hindrance, obstacle, discouragement or constraint in the performance of their functions and/or the implementation of their decisions.
• Periodically reviewed and approved the Internal Capital Adequacy Assessment Process (ICAAP) framework and ensured that ICAAP is subject to comprehensive internal audit oversight.
• Reviewed and improved the effectiveness of risk related policy framework of the Bank.
• Considered proposed material changes to the Bank’s risk profile or Risk Appetite arising from planned, new or increased business.
• Reviewed risk profiles of subsidiaries of the Bank.
• Took appropriate actions to implement software solutions to support the risk management function of the Bank, in order to migrate into advanced approaches in Basel guidelines in the future.
• Reviewed the risk indicators designed to monitor the level of specific risks at any given time, with a view of determining the adequacy of such indicators, to serve the intended risk management objectives and take proactive measures to control risk exposures.
• Reviewed the actual results computed monthly against each risk indicator and take prompt corrective action/s to mitigate the effects of specific risks, in case such risks are exceeding the prudent thresholds defined by the Board of Directors.
• Reviewed and approved the parameters and limits set by the Management, against various categories of risk and ascertained whether they are in accordance with the relevant laws and regulations as well as the desired policy levels stipulated by the Board of Directors.
• Took appropriate actions against the failures of the officers responsible for risk management functionality to improve the overall effectiveness of risk management at the Bank.
• Monitored the effectiveness and the independence of the risk management function within the Bank and ensured that adequate resources were deployed for this purpose.
• 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.
• Reviewed the updated Business Continuity and Disaster Recovery Plan annually.

During the year 2015, the BIRMC supported execution of the overall business strategy, within a set of prudent risk parameters that were reinforced by an effective risk management framework.

M.P. Jayawardena
Chairman – Board Integrated Risk Management Committee

Colombo
February 24, 2016