Page 46 - Bank-Muamalat-AR2020

44 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
About Us
ANNUAL REPORT FY2020

MITIGATING
PRINCIPAL RISKS

At Bank Muamalat, formulation and implementation of sound risk strategies go hand-in-hand with building and executing our
business and sustainability strategies. Continuous risk identification, analysis and mitigation have been and shall remain as key
components of risk management. While good and efficient risk management is critical in ensuring business resiliency, survival and
success, prudent risk management provides the buoys and anchors to tide through periods of volatility and high uncertainties. In
addition, mindful risk management cascades positive impact and value for all stakeholders..

Type of Risk Credit Risk Market Risk Rate of Return Risk Liquidity Risk Operational Risk Shariah Non-Compliance Technology and Cybersecurity Strategic Risk Reputational Risk

The risk of financial loss if a The risk of losses in on- and off- The risk of variability of assets and The risk of inability to fund any The risk of loss resulting Risk Risk The risk of unexpected The risk of loss arising
The risk that arises from
Risk arising from failure of IT
customer or counterparty fails balance sheet positions resulting liabilities arising from volatility of obligation on time as they fall from inadequate or failed failure to comply with the systems, applications, platforms adverse developments in the from negative perception
to meet its obligations. It is the from movements in market rates, market benchmark rates, impacting due, whether due to increase in internal processes, people Shariah rules and principles or infrastructure, which Bank’s performance stemming of the Banks’s image
Description and Impact of the risk on BMMB This risk may impact the Bank’s capital positions. economic value. and continued existence. and may result in legal and regulatory councils or reputational harm. The risk may present impacts to operations or shareholder
from fundamental strategic
by conduct or business
and system or from various
asset or demand for funds from
portfolios both in the trading and
primary source of risk to the Bank.
foreign exchange rates, equity and
as determined by the Shariah
could result in financial loss,
practice which adversely
disruptions to the technical
banking books. Such changes may
commodity prices, which may
and business decisions and
external events. The effect may Committee (“SC”) of the
depositors. This ability has a
impact profitability,
adversely impact earnings and
Bank and relevant Shariah
infrastructure and operations, or their execution.
extend beyond financial losses
adversely affect both earnings and
serious implication on reputation
profitability, liquidity, asset quality
committees.
reputational risk impacts.
value.
and reputation.
Cybersecurity risk is the
the Bank’s profitability, capital
The risk could impact the Bank’s
The risk may present an impact on
The Bank’s capital, liquidity and
probability of exposure or loss
profitability may be impacted by the
capital, liquidity, profitability, liquidity
This risk creates regulatory,
and reputation.
This risk could also create an
the Bank’s profitability, liquidity and
The Bank’s reputation,
resulting from a cyber attack
profitability and reputation
risk.
capital.
and reputation.
impact on the Bank’s profitability
liquidity, capital and
or data breach.
impacts.
and ability to meet regulatory
profitability may be impacted
requirements as well as disrupt
This risk could impact the Bank’s
the Bank’s business.
profitability, disrupt the Bank’s
business and have reputation by this risk.
impacts.
• Enhance key risk indicators to • Develop hedging strategies • Develop hedging strategies • Enhance liquidity limits and • Enhance monitoring of key • Ongoing Shariah review • Establish and operationalise • Ongoing review, • Ongoing monitoring of
monitor emerging credit risk and against adverse price movements against adverse price movements strategy to manage and optimise risk indicators to better track • Continuous monitoring & Technology Risk Management enhancement and Bank’s risk rating
provide early warning signals • Enhance monitoring in market • Enhance monitoring in market liquidity position risk exposures and provide reporting of Shariah Framework (“TRMF”) and monitoring of the business • Perform competitive
strategies, risk appetite and
early warning signals
Cyber Resilience Framework
risk limits
analysis on industry and
non-compliances
• Ongoing review, enhancements • Enhance monitoring of key risk • Enhance monitoring of key risk • Enhance monitoring of key risk • Ongoing review and • Enhance monitoring and • Develop and execute IT • Conduct periodic stress • Conduct periodic stress
risk limits
(“CRF”)
capital planning process
market benchmark
How we manage or mitigate the risk • Ongoing monitoring on • Diversification in pricing strategy • Diversification in pricing strategy • Ongoing monitoring of liquidity • Ongoing management of • Conduct periodic stress • Monitor technology and cyber • Build and protect
and monitoring of risk appetite.
indicators to better track risk
validation of operational risk
exposures and provide early
tracking of shariah non-
indicators to better track risk
indicators to better track risk
• Enhance and tighten risk
tools, i.e. Risk & Control
warning signals
testing and scenario
strategies in alignment with
acceptance criteria
compliance risk exposures
testing and scenario
exposures and provide early
exposures and provide early
analysis
Self-Assessment (“RCSA”),
business requirements and
• Enhance Liquidity
via risk tools, i.e. Key
warning signals
analysis
warning signals
• Periodic review on credit
Key Risk Indicators (“KRI”)
Contingency Funding Plan to
adherence to BNM’s Risk
Risk Indicators, Risk
ratings/scoring

and Incident Management &
manage liquidity crisis
Control Self-Assessment
Management in Technology
goodwill
• Conduct periodic stress testing
• Conduct periodic stress testing
Data Collection (“IMDC”)
(“RMiT”) policy
and Incident Management
and scenario analysis
collaterals, guarantees and risk
and scenario analysis
and Data Collection.
crisis early warning signals
limits
• Enhance risk strategies and
bank-wide operational risks
security risks and strategise
• Diversification in pricing strategy
monitoring in Asset and
• Conduct periodic stress testing
and monitoring of risk
testing and scenario
key initiatives and capabilities
and scenario analysis
• Conduct periodic stress testing
Liabilities Management
ratings
analysis
that improves the overall
and scenario analysis
• Diversify into new market
• Ongoing management of
technology and cyber posture
segments for consumer financing
business continuity strategy
• Streamline and enhance credit
and plan
maturity level and ensure
risk policies
• Ongoing management and
sustainability of cyber security
monitoring of outsourcing
controls
arrangements and mitigation
strategy • Improve cyber resilience
• Conduct periodic stress
testing and scenario analysis
• Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity • Ethics & Integrity
Link to Material Matter and/or Strategy • Customer Experience • Digital Banking • Digital Banking • Training & Education • Financial Inclusion • Customer Experience • Financial Inclusion • Financial Inclusion
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Economic Performance
• Financial Inclusion
• Customer Experience
• Customer Experience
• Customer Experience
• Financial Inclusion
• Procurement Practices
• Entrepreneur Development &
• Financial Inclusion
• Financial Inclusion
Responsible Financing
• Community Development
• Digital Banking
• Digital Banking
• Customer Experience
• Financial Inclusion
• Employment
• Financial Inclusion
• Digital Banking
• Training & Education
• Digital Banking
• Diversity & Equal
Opportunity
• Procurement Practices
• Digital Banking