Page 150 - Bank-Muamalat-Annual-Report-2021

148 BANK MUAMALAT MALAYSIA BERHAD
ABOUT US OUR LEADERSHIP OUR STRATEGY OUR PERFORMANCE

STATEMENT ON RISK MANAGEMENT AND
INTERNAL CONTROL

RISK CULTURE The Bank adopts a holistic, portfolio-based risk management
approach to ensure sustainable growth and market share while
The Board plays a key role in establishing and maintaining the remaining within the risk appetite and established parameters.
Bank's risk culture, setting and continuously reinforcing the Regular portfolio reviews and stress tests are performed to
“tone at the top” and holding management accountable for ensure appropriate and timely remedial action are initiated.
maintenance of high ethical standards and effective policies
and practices. The Bank continues to enhance and strengthen Several initiatives were implemented to improve the
its risk management practices by reinforcing and embedding management of credit risk. These include enhancements
a strong risk culture throughout the organisation. Focus is of credit risk reports to facilitate informed decision-making
directed on strengthening risk culture among all staff of the process, development and calibration of application and
Bank and ensuring that they are fully aware of the risks and behavioural scorecards and strengthening of risk monitoring
their implications. through dedicated risk and asset quality management
committees.
The Bank has established clear risk policies which are
continuously communicated and reinforced throughout the
MARKET RISK MANAGEMENT
Bank to cultivate and embed a robust risk culture. The
Management is committed in driving risk culture programmes
Market risk is defined as risk of losses in on and off-balance
which covers, amongst others, reinforcement of shared
sheet positions resulting from movements in market rates,
values, e-Learnings and engagement sessions with staff
foreign exchange rates, and equity and commodity prices
throughout the Bank. This is aimed at building a strong
which may adversely impact earnings and capital positions.
risk culture that is embraced by all employees towards
enhancing customer experience, building trust and brand The Bank’s market risk framework contains policies and
value of the Bank for its long-term sustainability. guidelines on key risk management practices such as risk
identification, measurement, mitigation, monitoring and
control. The market risk policies and specific limits for trading
RISK APPETITE
and non-trading books were reviewed and updated to be in line
The Bank defines its risk appetite by the amount and type of with the latest regulatory expectation and industry practices.
risks that it is willing to accept in pursuit of its strategic and
In view of the ongoing volatility in financial markets, the Bank
business objectives. The Bank’s risk appetite is driven by both
undertakes periodic stress tests to assess the impact of the
top-down through the Board leadership and bottom-up
movements in market rates to the Bank's profitability and
involvement of the management. The Board reviews and
capital.
approves the Bank’s risk appetite annually and is updated on
the status by the management on a monthly basis.
LIQUIDITY RISK MANAGEMENT
CREDIT RISK MANAGEMENT
Liquidity risk is the risk of inability to fund any obligation on time
as they fall due, whether due to increase in asset or demand
Credit risk is the risk of financial loss if a customer or counterparty
for funds from the depositors. The Bank will incur liquidity
fails to meet its obligations. The Bank manages credit risk
risk if it is unable to maintain liquidity, thus resulting in serious
through its framework of policies, processes, measurement
implications on its reputation and continued existence.
tools, methodologies, and an established reporting and
monitoring structure. The Credit Risk Policy (CRP) and Guideline
The Bank’s priority in managing liquidity risk is to maintain
to Credit Risk Policies (GCRP) document and outline the credit
a stable source of financial resources to meet its funding
underwriting standards and credit management policies and
requirements. The Bank ensures sufficient cash and liquid
guidelines. The policies are reviewed and updated regularly to
assets are made available to meet short and long-term
ensure its continued relevance and effectiveness.
obligations through active balance sheet and funding position
management.