Board integrated risk management committee report

The Board of Directors of People’s Leasing & Finance PLC which is primarily responsible for the integrated risk management initiatives has delegated its authority to the Board Integrated Risk Management Committee (“BIRMC” or “Committee”) to review and assess the adequacy and effectiveness of the risk profile of the Company and the Group, in terms of Section 8 (3) of the Finance Companies (Corporate Governance) Direction No. 03 of 2008.

Terms of reference (TOR)

In compliance with the aforementioned Direction, the TOR clearly sets out authority/delegations vested with the Committee, composition, responsibilities, meeting frequency and quorum, reporting and other procedures of the Committee.

Composition

Following the reconstitution of the Board of Directors of the Company on 19 February 2020 as mentioned on page 79 of the Corporate Governance Report, the BIRMC was reconstituted by the Board at its meeting held on 20 February 2020 and it presently comprises the following members:

Name of the BIRMC Member	Directorship status
Mr Chanura Wijetillake	Committee Chairman (Non-Executive, Independent Director) Appointed to the Committee w.e.f. 20 February 2020
Mr Azzam Ahamat	Committee Member (Non-Executive, Non-Independent Director) Appointed to the Committee w.e.f. 20 February 2020
Mr Clive Fonseka	Committee Member (Non-Executive, Non-Independent Director) Appointed to the Committee w.e.f. 20 February 2020
Mr A S Ibrahim (Chief Executive Officer/ General Manager)	Non-Director
Mr Sanjeewa Bandaranayake (SDGM – Operations)	Non-Director
Mr Lionel Fernando (SDGM – Operations)	Non-Director
Mr Rohan Tennakoon (DGM – Risk and Control)	Non-Director

Regular attendees by invitation

• DGM – Marketing
• DGM – Recoveries and Administration
• DGM – Internal Audit
• Compliance Officer
• Key Management Personnel from People’s Leasing Subsidiaries– Chief Executive Officer – People’s Insurance PLC – Technical Consultant – People’s Insurance PLC – Senior Manager – Head of People’s Micro-commerce Ltd. – Officer-in-charge of People’s Leasing Fleet Management Limited

Ms Akila Samarasinghe – Deputy Manager – Risk and control functions as the Secretary to the BIRMC.

Brief profiles of the Directors representing the Committee are given on pages 69 to 70 of the Annual Report.

Meetings

According to the TOR of BIRMC and in line with the regulatory requirements, the Committee meetings should be held at least four (04) times a year on a quarterly basis. During the period under review, the Committee held only two (02) meetings and the reasons for the same are explained under “frequency of meetings” on page 106.

Name	Attended/eligible to attend
Mr M P Amirthanayagam	*2/2
Mr Rasitha Gunawardana	*2/2
Mr M A M Rizwan	*2/2
Mr A S Ibrahim	2/2
Mr Sanjeewa Bandaranayake	2/2
Mr Lionel Fernando	2/2
Mr Rohan Tennakoon	2/2

*Mr M P Amirthanayagam – Committee Chairman (Non-Executive, Independent
Deputy Chairman/Senior Independent Director) and Mr M A M Rizwan – Committee Member functioned as Committee Chairman and Committee Member respectively up to 24 October 2019. Mr Rasitha Gunawardana – Non-Executive, Non-Independent Director functioned as a Committee Member up to 19 February 2020.

Reporting to the Board

Minutes of the Committee which include the deliberations and conclusions reached were submitted to the subsequent BIRMC meeting for the confirmation and adoption. All minutes of the meetings were formally approved by the Committee Chairman. Approved Minutes were also submitted to the Board within a week of the BIRMC meeting seeking their views, concurrence and/or specific directions.

Activities

The BIRMC effectively assisted the Board of Directors in performing its oversight function in relation to the internal/external risks faced by the Company in carrying out its business operations. All key risks tracked through Key Risk Indicators (KRIs) on a monthly basis are reviewed by the Committee at its meetings.

 

Assessment of Management Level Committees

• Reviewed the adequacy and effectiveness of the functions carried out by the Assets and Liabilities Committee (ALCO) by reviewing meeting highlight reports and the annual assessment performed against the
  ALCO’s TOR.
• Reviewed the effective functionality of Executive Integrated Risk Management Committee (EIRMC) by reviewing the meeting highlights/minutes of the EIRMC meetings which include the deliberations carried out particularly on the credit risk and operational risk matters. DGM-Risk and Control who chairs the EIRMC briefed the activities of EIRMC to the Committee.

Credit risk

• Reviewed the portfolio quality through non-performing loan analysis based on assets and products together with other credit risk indicators such as
  sector-wise credit concentration and compliance with the Single Borrower Limits etc. The Committee deliberated in detail on the necessary course of action to improve the asset quality of the Company.
• In February 2020, the credit policy was reviewed and the proposed amendments thereon were approved by the Board.
• Reviewed the adequacy of impairment coverage and stress test results performed for credit risk.

Liquidity and market risk

• Reviewed the adequacy of liquid assets maintained and the maturity mismatch, sensitivity analysis and interest rate repricing gaps.
• Reviewed liquidity stress test results and adequacy of contingent funding lines.
• Reviewed the highlight reports of ALCO meetings submitted to the Committee in assessing the effectiveness of liquidity and market risk management.

Operational risk

• Reviewed key operational risk indicators established in respect of ICT, Human Resources, Frauds etc.
• Reviewed the progress of Business Continuity Plan implementation process and the adequacy of disaster recovery plans.

Regulatory and compliance risk

• Reviewed the Company’s compliance with the regulatory requirements and monitored against the risk tolerance levels.
• Reviewed the compliance reports submitted by the Compliance Officer to assess the Company’s compliance with laws, regulations, regulatory guidelines, internal controls and approved policies in all areas of Company operations.
• Reviewed the adequacy of capital in line with new capital adequacy requirements of the Central Bank of Sri Lanka which came in to effect from 1 July 2018.

Strategic risk

• Reviewed the effectiveness of strategies implemented in response to the changes in the business environment.
• Reviewed strategic risk indicators against the risk tolerance levels.

Assessing the risk profile of subsidiary companies

During the year under review, in line with the Finance Companies (Corporate Governance) Direction, No. 03 of 2008, Section 8 (3) (b), the following subsidiary companies submitted Risk Dash-board/key risk indicator reports to the BIRMC enabling the Committee to review the risk profile of each subsidiary company and the overall risk profile of People’s Leasing Group. Highlights of subsidiary company reviews are given below:

People’s Insurance PLC (PI)

• The Committee reviewed the underwriting quality, investment concentrations together with KRIs of default risk, operational risk, strategic risk, compliance risk on a quarterly basis.
• The Committee reviewed the PI’s Compliance to the Risk-Based Capital Model regulated by the Insurance Regulatory Commission of Sri Lanka (formerly known as Insurance Board of Sri Lanka).

People’s Micro-commerce Ltd. (PML)

• PML is involved in the business of providing microfinance facilities to ensure financial inclusivity of the under privileged, rural and urban population and operates with a different risk profile.
• The Company’s risk profile was quarterly reviewed by the Committee against set risk tolerance limits.

Other subsidiaries

• BIRMC quarterly reviewed the Risk Dash-board reports submitted by People’s Leasing Fleet Management Limited.
• Reviewed the Risk Indicator reports submitted by People’s Leasing Property Development Limited.

People’s Leasing Havelock Properties Limited and Lankan Alliance Finance Limited (People’s Leasing’s Bangladesh Subsidiary) commenced preparing Risk Indicator Reports and Risk Dash Board Reports respectively from December 2019 onwards. The relevant papers were discussed by the BIRMC at its meeting held in June 2020.

The Risk and Control Department co-ordinated with aforementioned subsidiaries of People’s Leasing and briefed the Committee with the relevant information through various risk indicators and additional information.

Detailed assessment on Group Risk is given on pages 137 to 138 in this Annual Report.

Others

• Worked closely with the Corporate Management, Senior Management and Key Management Personnel supervising broad risk categories (credit, market, liquidity, operational and strategic risks) and made decisions on behalf of the Board within the framework of the authority and responsibility assigned to the Committee.
• Supervised the procedures of Integrated Risk Management responsibilities pertaining to risk management strategies, policies and processes.
• Recommended corrective action to mitigate the effects of specific risks at levels beyond the risk tolerance levels approved by the Board and on the basis of Company’s policies, regulatory and supervisory requirements.

During the year under review, the BIRMC extended its support in line with the risk appetite and tolerance framework, in the execution of overall business strategy emphasising the upside and downside risks which can have an impact on the Company.

 

Chanura Wijetillake
Chairman
Board Integrated Risk Management Committee

8 July 2020

Colombo