Page 390 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

BASEL II
PILLAR 3 DISCLOSURE

3.0 RISK MANAGEMENT (CONT’D)
Risk Governance (cont’d)

Other management-level risk committees are set up to oversee specific risk areas and its related control functions
as described below: (cont’d)
Table 6: Risk Committees & Functions (cont’d)

Committee Objective
Model Validation Committee (MVAC) To challenge the model development and model validation in compliance
with credit risk models, whether internally or externally developed
and validated. The outcome of MVAC will be presented to ERMC and BRCC
for approval.

Credit Risk Management Committee To ensure financing activities are in line with the Bank’s credit risk appetite
(CRMC) and policies and to deliberate on the effectiveness of the credit risk mitigation.

A dedicated and independent Risk Management Department (“RMD”) supports the above committees by carrying out
the day-to-day risk management functions, drafting of risk- related policies and procedures, and providing reports,
risk analyses and recommendations for the Management’s and the Board’s decision-making.

The Bank’s risk governance structure is based on the principle that each line of business is responsible for managing the
risk inherent in their undertaken business activities. The line managers are therefore responsible for the identification,
measurement and management of risks within their respective areas of responsibility.
The risk governance framework is implemented under a “distributed function” approach where risk is being managed
based on the three lines of defense model. The components and their respective roles are as described below:
Table 7: Risk Management Model

Three (3) Lines of Defence Model

All units have a specific responsibility for risk management under the above model
First Line Defense Model • Risks are directly undertaken and assumed in the day-to-day business
Business Units activities and operations.
• As front-liners, responsible for carring out the established processes
for identifying, mitigating and managing risks within their respective
environment aligned with the Bank’s strategic targets.
Second Line Defense Model • Ensures independent oversight and management of all material risks
Risk Management & Control undertaken by the Bank.
Compliance • Provides specialised resources for developing risk frameworks, policies,
methodologies and tools for risk identification, measurement and
control.
• Provides the control function, which monitors the risk by using various
key indicators and reports, guided by established risk appetite and
tolerance limits.

Third Line Defense Model • Provides independent review and assurance on adequacy of risk
Internal Audit management processes and effectiveness of the first two lines of
defence in fufilling their mandates.

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