Page 86 - UBF AR 2018 - E Version

NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2018

33. RISK MANAGEMENT (Contd...)

33.2 Risk management structure 33.4 Risk mitigation

The Board of Directors is responsible for the overall As part of its overall risk management, the company uses

risk management approach and for approving the risk various instruments to manage exposures resulting from

management strategies and principles. The Board has credit risks, changes in interest rates, equity risks, and

appointed a Board Sub Committee called "Integrated exposures arising from transactions.

Risk Management Committee (IRMC)” which has the

responsibility to monitor the overall risk process within the The company actively uses collateral to reduce its credit

company. risks.

The IRMC has the overall responsibility for the development 33.5 Excessive risk concentration

of the risk strategy and implementing principles,

frameworks, policies and limits. IRMC is also responsible In order to avoid excessive concentrations of risk, the

for managing risks and monitoring risk levels and reports company’s policies and procedures include specific

on monthly/quarterly basis to the Board. guidelines, including concentration limits to focus on

maintaining a diversified portfolio. Identified concentrations

Exceptions are reported on daily/ monthly/ quarterly of credit risks are controlled and managed accordingly.

basis, where necessary, to the IRMC or its sub committees,

and the relevant actions are taken to address exceptions 33.6 Credit Risk

and any areas of weakness.
The company manages and controls credit risk by setting

limits on the amount of risk it is willing to accept for
Company Treasury and the Asset Liability Committee
individual counterparties and for geographical and
(ALCO) are responsible for managing the company’s assets
industry concentrations, and by monitoring exposures in
and liabilities and the overall financial structure.
relation to such limits.

33.3 Risk measurement and reporting systems
The company has established a credit quality review

process to provide early identification of possible changes
Monitoring and controlling risks is primarily performed
in the creditworthiness of borrowers, including regular
based on limits established by the company. These limits
collateral revisions. Company uses a risk rating process
reflect the business strategy and market environment of
to rate the borrowers according to its risk profile. The
the company as well as the level of risk that the company
credit quality review process aims to allow the company to
is willing to accept, with additional emphasis on selected
assess the potential loss as a result of the risks to which it
industries. In addition, the company’s policy is to measure
is exposed and take corrective action.
and monitor the overall risk bearing capacity in relation

to the aggregate risk exposure across all risk types and
activities. A structured and standardized credit appraisal and
approval process is in place. Credit Authority lies with

the Board of Directors, Board Credit Committee, Credit
Information compiled from all the businesses is examined
Committee and members of the management as per the
and processed in order to analyse, control and identify
assigned limits on delegated credit authority. All credit
risks on a timely basis. This information is presented
facilities are required to be reviewed by the Branch
and explained to the Board of Directors and Integrated
Managers and Product Managers annually. Company’s
Risk Committee. These reports include aggregate credit
systems for credit evaluation and decision making are
exposures, credit concentration, operational risk,
independent from collateralization albeit collateral helps
market risk and liquidity ratios. Management assess the
to mitigate credit risk.
appropriateness of the allowance for credit losses on a
monthly basis.
Credit Operation Department reviews credit facilities

before and after sanctioning of facilities. A separate Loan
Risk related policies are documented and made available
Review Policy approved by the Board of Directors is in
to all staff at all levels for a comprehensive understanding
place.
of the Company’s risk appetite and the overall risk

management of the Company. Workshops are held to share
In the post sanctioning review of credit facilities, the Credit
knowledge of potential risk events and keep the staff
Committee reviews among other things, the disbursements,
abreast with the latest changes. Briefings are also given to
perfection of collaterals and repayments are in accordance
other relevant members of the company on the utilization
with the terms of approval.
of market limits, proprietary investments and liquidity,

plus any other risk developments.

84 UB Finance