Page 44 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

PRINCIPAL RISKS AND

UNCERTAINTIES

At Bank Muamalat, risk identification, analysis and mitigation have been continuously
practised as key components in building and executing our business sustainability
strategy.

We strive to enhance our risk analysis and response by understanding the issues that are material to the business and
our stakeholders. Here, we outline the principal risks within our operating environment, define the ways in which they could
affect Bank Muamalat and how we manage these risks.

Type of Risk Description and impact of the risk How we manage or mitigate the risk

Credit Risk The risk of financial loss if a customer or • Enhance key risk indicators to monitor emerging credit risk and
counterparty fails to meet its obligations. provide early warning signals
It is the primary source of risk to the Bank • Ongoing review, enhancements and monitoring of risk appetite
This risk may impact the Bank’s • Enhance and tighten risk acceptance criteria.
profitability, asset quality, liquidity and • Ongoing monitoring on collaterals, guarantees and risk limits
reputation • Conduct periodic stress testing and scenario analysis to assess
customer
• Diversify into new market segments
• Streamline and enhance Credit Risk policies
• Validate Credit Risk models

Link to Material Matter Link to Impact on Capitals

Market Risk The risk of losses in on- and off-balance • Develop hedging strategies against adverse price movements
sheet positions resulting from movements • Enhance monitoring in market risk limits
in market rates, foreign exchange rates, • Enhance monitoring of key risk indicators to better track risk
equity and commodity prices, which may exposures and provide early warning signals
adversely impact earnings and capital • Ongoing review, enhancements and monitoring of risk appetite
positions
• Diversification in pricing strategy
The risk may present an impact on the • Conduct periodic stress testing and scenario analysis
Bank’s profitability, liquidity and capital • Streamline and enhance Market Risk policies

Link to Material Matter Link to Impact on Capitals

Ethics & Economic Entrepreneur Procurement Digital Energy Consumption
M1 M2 M3 M4 M5 M6
Integrity Performance Development Practices Banking and Environmental
Impact
Community Customer Diversity and Training and Financial Responsible
M7 M8 M9 M10 M11 Employment M12 M13
Development Experience Equal Opportunity Education Inclusion Financing
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