Risk management

Safeguards for sustainability

We believe a strong risk management culture is fundamental to our success. It ensures that our activities and impact are consistent with our overall strategy and priorities. Our risk approach aims to instil conscious risk assessment and control throughout the Bank as we pursue our identified growth opportunities. Our well-developed risk management framework and clear risk appetite, which describes the levels of risk we are willing to accept in executing our progress strategy, ensures a consistent focus on robust risk management.

At AU Bank, risk management is an independent function, which monitors liquidity, operational, market, credit, information security and other risks with robust tools and knowhow.

RISK GOVERNANCE STRUCTURE WITH THREE LINES OF DEFENCE (LOD)

OPERATIONAL RISK MANAGEMENT (ORM)
Our Bank has a Board-delegated committee for Operational Risk Management (ORMC) to review and advise for implementation of measures for risk mitigation. This committee reports to Risk Management Committee of Board (RMCB). With a view to having a comprehensive view on operational risks, our Bank follows an integrated risk approach where operational risk and its monitoring fold into Chief Risk Officer (CRO) and ORMC. We have business continuity framework to ensure the continuity of services in the event of any catastrophic event. Our operational risk management framework is designed with a clear understanding of various operational risks faced by our Bank, and for our continuous monitoring, disciplined risk assessment and mitigation measures have been put in place.

FRAUD RISK MANAGEMENT
We have effective risk management framework and Risk Containment Unit (RCU) that is guided by a Board-approved Fraud Risk Management Policy. We have an experienced Risk Containment Unit, which develops anti-fraud measures, executes surveillance mechanism on banking transactions and analyses causal factors of frauds. The unit has established a robust fraud detection process and periodically carries out various fraud prevention awareness campaigns for employees as well as customers.

VIGILANCE RISK
At AU Bank, we have a solid and transparent vigilance mechanism that covers each aspect of staff accountability. The vigilance team endeavours to promote integrity, transparency and accountability in our day-to-day working environment. We practice all three types of vigilance, i.e., Preventive, Detective and Punitive.

CREDIT RISK MANAGEMENT
All aspects of credit risk are governed by the Credit Risk Management Policy and other Policies managed by the Credit Risk team. The scope of the Credit Risk unit includes measuring, assessing and monitoring credit risk within our Bank. We have laid down prudential limits and caps on various aspects to control the magnitude of credit risk. Rigorous risk reporting and controlling mechanism is prevalent across the organisation. Loan administration and monitoring is carried out through Portfolio Profiling, Early Warning Framework, Rapid Portfolio Review and Annual Monitoring of High Value Customers. We have in place an integrated risk measurement framework that captures all components of market risks, including volatility and unpredicted movement in the market value of the investments.

LIQUIDITY AND MARKET RISK MANAGEMENT
The Asset Liability Management Committee (ALCO) of our Bank oversees the framework for identification, measurement and management of market risk, interest rate risk and liquidity risk in our Bank, and ensures compliance with established internal and regulatory prudential limits. ALM helps in strengthening the framework to ensure that enough liquidity and contingency buffers are maintained for the banking business. We have put in place an integrated risk management framework that captures all components of market risk, including volatility and unpredicted movement in market value of the investments. Market risk is being managed using Board-approved investment limits and monitored using different measures that give a detailed picture to the management of potential gain/losses for a range of market movement.

Our Bank has a well-developed market risk framework comprising Board-approved policies and governance structure. In our Bank, Market Risk management is an independent function, which reports to the CRO.

INFORMATION SECURITY RISK MANAGEMENT
At AU Bank, we have established robust information and cyber security framework for securing its IT infrastructure and systems. The Chief Information Security Officer (“CISO”) is responsible for monitoring the information security risks covering all aspects of data security for the Bank and reports to Chief Risk Officer (CRO). Further, the Cyber Security Operation Center (CSOC) with qualified professionals reports to CISO for monitoring of real-time cyber security threats.