Composition of the Board Integrated Risk Management Committee (BIRMC)

During the financial year ended December 2023, the composition of the Board Integrated Risk Management Committee (BIRMC) exhibited stability, with no alteration to its membership.

There were four Non-Executive Directors and an Executive Director as at 31 December 2023 as members of the Committee. The Chief Risk Officer, who is also a voting member, functions as the Secretary to the Committee. Heads of key functional areas such as Lending, Finance, Treasury, Operations, Information Technology, Internal Audit, and Compliance attend the meetings on invitation. The membership of the BIRMC as at 31 December 2023 was as follows:

N Vasantha Kumar – Chairperson of the Committee/Independent Non-Executive Director

Ms L K A H Fernando – Independent Non-Executive Director

Ms V J Senaratne – Non-Executive Director

W R H Fernando – Independent Non-Executive Director

N H T I Perera – Executive Director/Chief Executive Officer

K Jayasuriya – Chief Risk Officer

Charter and the Responsibilities of the BIRMC

The approved Charter for the BIRMC stipulates authority, structure, responsibilities, and tasks of the BIRMC. As per its Charter, the primary responsibilities of the BIRMC are to review and ensure

1. Integrity and adequacy of the risk management function of the Bank.
2. Adequacy of the Bank’s capital and its allocation.
3. Risk exposures and risk profiles of DFCC Bank are within acceptable parameters and to make recommendations to the Board of Directors on any action required.
4. Adequacy and effectiveness of the Management Committees through a set of defined tools.
5. Availability of a comprehensive and updated set of risk policies and guidelines covering overall operations of the Bank.
6. The compliance of the Group’s operations with relevant laws, regulations, and standards including the adherence to the CBSL Direction on Corporate Governance.

The process through which the BIRMC discharges its responsibilities is detailed in the Risk Management Section of this Annual Report.

BIRMC Meetings

As per the Charter, BIRMC should meet once in two months. During 2023, DFCC Bank convened six BIRMC meetings. The attendance of members is listed on page 185 of the Annual Report. The Committee continued to review policy frameworks, risk management strategies, risk capital position, key risk indicators and top and emerging risks at these meetings and was satisfied that the risk exposures of the Bank and the Group were being appropriately managed. During the financial year, the following key initiatives were achieved by the Committee

1. Reviewed and approved the Internal Capital Adequacy Assessment Process (ICAAP) of DFCC Bank, which was a regulatory requirement with effect from January 2014. BIRMC will continue monitoring and proposing future capital requirements as per the Bank’s growth targets for the next few years.
2. In relation to the management of compliance risk, compliance risk indicators with different risk scales were reviewed and specific areas of focus were recognised based on the possible impact and the probability of occurrence.
3. Risk controls and monitoring tools were further improved with revisions to the overall risk limits system of the Bank from time to time as required. New advisory limits were put in place as trigger limits as required.
4. All existing risk policies and practices were reviewed by the Committee in line with the Bank’s specific requirements, industry dynamics, and regulatory specifications and approved the necessary amendments to further strengthen the risk management processes in the Bank.
5. The annual review of effectiveness and adequacy of the Management Committees were conducted by the BIRMC during the first quarter of 2023. The review results were shared with the respective Committees for necessary improvements.
6. Reviewed and implemented the CBSL recommendations based on the examination report requirements in relation to the integrated risk management function of the Bank.
7. Having duly recognised the trends in increasing threats on systems and information security, the Committee paid increased attention by reviewing the adequacy of the security information systems and closely monitoring the action plans and implementation of new projects for further improving information systems security in the Bank.
8. During 2023, the Committee paid more attention on reviewing elevated risk levels in the operating environment due to macroeconomic instability. The Committee reviewed the adequacy of the risk mitigating actions taken and stress testing results under the current operating environment.

Reporting

The proceedings of the BIRMC meetings are reported to the Board through submission of the meeting minutes. Top and emerging risks and other specific matters are submitted separately for information of the Board on a monthly basis. The recommendations made by the BIRMC during the year under review were duly approved by the Board.

N V Kumar
Chairman
Board Integrated Risk Management Committee

19 February 2024