CBI’s risk group is responsible for managing all areas of risk associated with the bank. The Chief Risk Officer (CRO) has an overall responsibility of the bank’s risk profile and for reviewing risk across various categories on an organization wide basis.
Risk Management & Governance
CBI undertakes a wide variety of businesses and has a robust risk management framework which identifies, measures, controls and reports all associated risks. On the other hand, the board of directors has the scope and responsibility of oversight of the risk management policies & practices across CBI. The responsibly of risk governance lies with the risk committees who in turn define the relevant risks to the organization (both financial and non financial risks, including market, credit, liquidity, operational, compliance, strategic, reputational and legal.)
The Bank is exposed to credit risk through its various lending activities such as funded facilities and non-funded facilities. CBI’s credit risk management process is fully independent of the business to protect the integrity of the credit decisions and risk assessment process.
CBI has tailored credit approval processes to suit the customer, product, sector and exposure types. The Risk Group’s Credit Manual is reviewed frequently to ensure up to date guidelines for new credit approvals, renewals or changes in the existing terms and conditions of the previously approved credit policies. The Bank has a dedicated team of experienced credit review professionals who identify risk at an early stage and take proactive measures to minimize the impact.
A variety of tools including notional limits, sensitivity measures and scenarios are considered for measuring such market risks. The Board of Directors has set risk limits based on notional limits and sensitivity analysis which are closely monitored by the Risk Management Department, reported frequently to Senior Management and discussed monthly by ALCO.
The objectives of the Operational Risk team is to develop a common understanding and awareness of operational risks across CBI; ensure that there is a clear understanding of responsibility and accountability in managing and mitigating operational risks; improve internal controls and thereby reduce the probability and potential impact of losses; maintain an operational loss data base; and improve the risk and control culture across the Bank. We also have an end-to-end operational risk software that is suited to managing qualitative and quantitative operational risk data.
Capital Management and economic capital
Capital Management is an ongoing process of ensuring adequate capital is available to meet regulatory capital requirements and ensure optimum capital usage. The Bank has implemented a dedicated capital management system which calculates the capital adequacy ratio in compliance with CBUAE and Basel II guidelines. Using this system, exposures are measured at the most granular level so that account level data is correctly used for calculation of risk weights, credit conversions and allocation of credit risk mitigants. CBI has also adopted the Basel II Standardized Approach to measure regulatory capital requirement on credit risk and market risk. For operational risk, the regulatory capital requirement is calculated based on Basic Indicator Approach. CBI has adopted "Pillar I Plus" approach for ICAAP where the bank can assess the additional capital requirements on the Pillar 2 risks like credit concentration risk, interest rate risk and other risks relevant to CBI. This also includes the capital charge estimations resulting from stress testing.