Chairman’s Statement

Role of the Committee

The main role and responsibility of the Committee is to assist the Board in fulfilling its oversight responsibilities for all aspects of risk management. In this connection the Committee focuses on and reviews risks such as credit, market, liquidity, operational and strategic risks through appropriate risk indicators and management information.

In addition to the above, the Committee is responsible for reviewing and/or recommending the following which are identified in the Charter of the Integrated Risk Management Committee:

• Policies, programmes and Management Committee Charters relating to risk management and compliance.
• Risk limits and policies that establish appetite for credit, market, liquidity, operational and other risks, as recommended by the Chief Risk Officer.
• Adequacy and effectiveness of all Management Level Committees such as the Credit Committee and Assets and Liability Management Committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the Committee.
• Risk management reports on the risk profile of the Bank, as well as current market and regulatory risks and actions undertaken to identify, measure, monitor and control such risks.
• Corrective action to mitigate the effects of specific risks in case such risks are beyond the prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements.
• Appropriate actions against the officers responsible for failing to identify specific risks and take prompt corrective action as directed by the Director of Bank Supervision or otherwise.
• Adequacy and effectiveness of risk identification, measurement, monitoring and mitigation relating to credit, market, liquidity, operational and compliance risks.

Composition and Quorum

The members of the Committee during the year under review 2016 are as follows:

• Mr Charitha N Wijewardane
  Chairman
  Independent Non–Executive Director
• Mr Sanjaya Padmaperuma
  Member
  Independent Non-Executive Director
• Mr H P Ajith Gunawardana
  Member
  Independent Non-Executive Director

Permanent management representatives on the Committee –

• Mr D M Gunasekara
  General Manager
• Mr D N L Fernando
  Chief Risk Officer

The details of the members can be seen from the Directors’ biographical details appearing on pages 40 and 41 of this Annual Report.

The quorum of the Committee is two members.

The Secretary, Bank of Ceylon/Secretary to the Board functions as the Secretary to the Committee. The Chief Financial Officer and the Chief Internal Auditor are invited to be present at the meetings. Other members of the staff are invited to attend the meetings when the Committee requires their presence.

Meetings and Activities

The Committee met seven times during the year under review. The attendance of Committee members at meetings is given in the table on page 66.

Activities carried out by the Committee during the year under review are summarised below:

• Reviewed and/or recommended the following policies based on which the risk profile of the Bank is assessed:
  • Credit Risk Management Policy
  • Market Risk Management Policy
  • Operational Risk Management Policy
  • Stress Testing Policy
  • Integrated Risk Management Policy
  • Anti-Money Laundering/Compliance Policy
  • Liquidity Risk Management Policy
  • Foreign Exchange Risk Management Policy
  • Limit Management Framework for Treasury Operations
  • Middle Office Operations Manual
• The Independent Integrated Risk Management Division of the Bank assessed the risks of the Bank on a monthly basis and summary reports were submitted before the Committee. The Committee reviewed them and submitted its recommendation to the Board immediately through minutes of the meeting and specific recommendations.
• Risk Appetite and Limit Setting for 2016 was established.
• Monitored quantitative and qualitative risks which have gone beyond the limits and made the necessary recommendations.
• Followed up on the implementation of state-of-the-art risk management system for managing credit, operational and market risks and also an Anti-Money Laundering Software Solution.
• Recommended the adoption of the revised Internal Capital Adequacy Assessment Process (ICAAP) for the year 2016.
• Recommended the adoption of the revised Internal Capital Adequacy Assessment Process (ICAAP) for Chennai Branch.
• Reviewed the comprehensive Compliance Reports submitted by the Compliance Officer.
• Reviewed the implementation of 5S System in the Branches.
• Improved the Risk Management Dash Board to support the subsidiaries to manage their risk functions. Also a team from the Risk Management Division has been created to assist subsidiaries in their risk matters.
• Evaluated and monitored subsidiary Risk Management Dash Boards.
• Monitored Key Risk Indicators in the Branch network, critical businesses and support divisions.
• Recommended adoption of the revised Business Continuity Plan 2016/17.
• Reviewed stress testing results on quarterly basis.
• Special emphasis was placed on IT Risk and associated Cyber Security and initiated and followed-up on various measures to safeguard the Bank from Cyber attacks.
• Appointed a new IT Risk Officer and IT Security Risk Officer to manage IT risk related issues.

The Committee reported to the Board by way of minutes giving its recommendations. All minutes of the Committee meetings are tabled and ratified at meetings of the Board and follow up action is taken on outstanding matters.

Conclusion

Acting collectively, the members of the Integrated Risk Management Committee evaluated its performance for effectiveness and efficiency and is satisfied with its performance.

The Committee constantly seeks ways to improve its performance. Its approach to this includes studying ways of incorporating best practices into its functions and improving the usefulness of the reports generated. The efforts of the Committee cover a wide area including acquiring knowledge, increased investment in technology, improving processes and the development of in-house expertise. Increasing awareness among staff of the need for managing risks and ensuring compliance and training staff are important components of this approach. The Committee is satisfied that the approach used in this regard is sound. The Committee expects that it will be capable of making an even more effective contribution to the Bank’s stability.

On behalf of the Integrated Risk Management Committee,

Charitha N Wijewardane
Chairman
Integrated Risk Management Committee

29 March 2017
Colombo