RISK MANAGEMENT ADVISORY CRRH WORKSHOP 17 18 Dec 2018 Lome - PowerPoint PPT Presentation

RISK MANAGEMENT ADVISORY CRRH WORKSHOP 17 – 18 Dec 2018 Lome

Agenda • Integrated risk management approach • Why risk management • Diagnostic assessment • MEA Team • Appendix 2

Risk Management 3

IFC offers a holistic risk management solution to strengthen financial institutions’ capacity and frameworks Risk Management Benefits: • Increases risk awareness in FIs Corporate Governance • Generates new opportunities • Guards against substantial losses Policies, Processes, Practices • Adds shareholder value • Ensures regulatory compliance • Delivers strategic advantage Reputational, Legal and Strategic Risks • Fosters stable financial system and sustainable growth Capital Adequacy Market, Risk Management Tools: Liquidity • Link between strategy and objectives Operational Credit • Identification of risks and and ALM Risk Risk opportunities Risk • Risk measurement & aggregation • Monitoring, evaluation & mitigation • Establishing controls • Reporting and Communication People, Training, Culture 4

A comprehensive Risk Management offering to create value for our clients and investments Non Risk NPL ICAAP Credit Risk Financial Governance Management Risk Board, Risk ICAAP Document / Framework Policy & Portfolio analysis Policy & Policy Regulatory risk Policy, BRC / framework & reporting Framework ERC, ERM, 3LOD CRO Role / RM Pillar 1+2 risk Early warning department Lending process Analysis & assessment and indicators / other Reputational risk organization, end-to-end reporting measurement analytics structure Building Foundations Board / Exec Risk Capital Adequacy / Credit file review NPL unit integrated Planning / BS / assessment / Stress testing organization and Strategic risk reporting analysis underwriting management Risk Appetite Credit Monitoring & Capital / macro Rating / scoring Framework & administration / workout activities / stress testing models Statement Collateral restructuring Economic capital Capital allocation / Risk Culture / (PD / LGD Collateral RAROC / RAPM / Model validation Risk Strategy modeling) master valuation RBP rating scales Provisioning Risk limits Impairment / write policy & methods framework / Economic Capital Credit Risk Limit off / Asset IAS / IFRS9 policy disposal expected loss Concentration LMS / Credit risk risk analysis systems 5

A comprehensive Risk Management offering to create value for our clients and investments (Continued) ALM Interest Rate Market Risk Liquidity Risk Operational Risk ALCO Set-up Risk (Banking Book) Financial Capital ALCO Policies instruments Policy & Policy / Policy & calculation and processes classification, use framework Framework Framework (exclude AMA) & valuation Liquid asset / Internal control / Trading book Risk identification funding plan / Ratios / gap compliance / ALCO Framework structure, policy, and assessment / treasury analysis / reporting internal audit limits, operations risk register management functions Risk Management Ratios / gap Dynamic BS & Risk Control Self ALM Business Building Foundations & measurement: analysis / product behavioral Assessment Infrastructure Continuity Plans Interest rate reporting modelling (RCSA) Risk Management Interest rate Full BS cash flow Loss data & measurement: & product scenario and mapping / IT Risk / Cyber FX (+ other ALM Governance behavioral stress test database / other security e.g.equity) modelling methods ORM tools Market risk capital, Earnings at risk / KRI library / internal models, Economic value at Stress testing reporting / Fraud risk VaR, ES risk / Economic ALCO reporting analysis capital Derivatives / New product risk Funds transfer hedging Basel III assessment / Stress testing, ALCO tools and requirements pricing Business Process scenario analysis practices Risk Mapping Liquidity Stress testing Yield curve contingency construction / planning and analysis procedures Treasury / Market risk systems 6

RM Advisory Services How We Work: Engagement and Project Cycle IFC ENGAGEMENT CYCLE 1 4 5 2 3 BOARD CLEARANCE & RESULTS & PROJECT DIAGNOSTICS IMPLEMENTATION CLIENT MONITORING DESIGN AGREEMENTS • Preliminary client • Objectives • Results Signing Agreements: due diligence Advisory Service / • Project elements • Monitoring & Cooperation • Gauging current Evaluation • Work Plan Agreement with situation • TOR Design scope and payment • Site visits terms • Phases • Conditions TYPICAL IMPLEMENTATION PROJECT CYCLE DIAGNOSTICS RECOMMENDATION IMPLEMENTATION • SWOT analysis • Prioritization of issues • Global experience and • Benchmarking • Implementation plan local delivery team • Supervision of activities • Best practice guidelines • Project monitoring and supervision 7

Why Risk Management……. • Supports the development of a stable financial system with increased opportunities for sustainable growth • Adds shareholder value by optimizing risk/return trade-offs and capital allocation • Builds a strong competitive advantage by creating new opportunities and attracting new clients • Leads to increased risk awareness across the organization which benefits overall governance • Guards against substantial losses and insolvency • Ensures regulatory compliance, contributes to better decision making and enhances financial performance in a risk – conscious manner 8

IFC Risk Management advisory enables banks to… • Define overall governance, structure of the key functions and determine how they should interact • Identify, quantify, and prioritize their most important risks and also ensure sound risk measurement, reporting, monitoring and management processes • Gain an understanding of their risks and how they can use this to improve strategic, financial, and operational decision making • Gauge their risk bearing capacity in order to ensure that their risk choices are aligned with their strategy and their capabilities • Integrate risk-return related considerations into important decisions such as capital allocation and product pricing • Support the creation, development and implementation of the core elements of their risk culture 9

A key component of Risk Management advisory is a diagnostic Market • Credit A 360 degree view of key Risk Risk risk management areas • A snapshot of areas in which risk management Operational Risk might be improved Risk Governance • Benchmarking to international best practice ALM & • Identification of gaps Liquidity IT & MIS relative to needs Management • Prioritization of Risk recommendations and ICAAP Policies & roadmap Procedures 10

MEET THE RISK MANAGEMENT MEA TEAM Simba Mabhena Patricia Mwangi Senior Risk Senior Operations Management Officer Specialist Africa Global • Senior Operations Officer responsible for the delivery of Senior Risk Specialist responsible for the management and delivery of • risk advisory engagements in Africa RM advisory projects globally but based in Africa. • Over 18 years in the financial sector working with banks Over 17 years of international banking experience working with financial • and microfinance institutions to serve small businesses institutions in Africa, Europe and the Middle East. and micro enterprises. Specialization: Treasury risk management, trading, liquidity, ALM, • • Experienced in project management, financial capital, balance sheet risk management and Basel framework. management and RM • Specialization: Microfinance, Digital Finance, Risk Management Amine Benjelloun Fahd Diouri Operations Officer Associate Operations EMENA Officer EMENA Over 7 years experience providing advisory • Over 15 years of professional banking experience in Europe, Middle • and consultancy services for financial East and North Africa in commercial banking institutions in Algeria, France, Morocco and Specialties: Organizational transformation, RM & Internal Control, SME • Tunisia, banking & Information System Management Specialties: Risk Management, Processes • Clients: Amen Bank, Banque Populaire, BMCE, BCP, Attijari wafa Bank • reengineering and optimization, Product development Clients: Amen Bank, Al Barid Bank, Attijari • wafa Bank, Banque Populaire, SGA, … 11

Appendix 12

KNOWLEDGE MANAGEMENT RESOURCES PUBLICATIONS Responsible Debt Collection in Emerging Markets: A global study on existing retail debt collection practices in emerging markets that recommends tangible actions lenders and collectors can take to promote responsible and ethical standards in the field. Corporate and SME Workouts: Lessons of experience and best practices for detecting, prioritizing, setting up or strengthening organization arrangement, and resolving distressed corporate / SME loans. The Risk Management Balancing Act - Developed and Emerging Market Practices: A review of global risk management practices and recommendations for financial institutions in emerging markets. Risk Culture, Risk Governance, and Balanced Incentives: Handbook brings new insights for financial institutions in EMs, defining specific factors that are indicators of culture, governance, & incentives in a strong RM framework; establishing a “maturity matrix” to benchmark these factors; and identify gaps. 13