Bank Islam Integrated Annual Report 2020

Risk Capacity Risk Tolerance Risk Appetite What is the maximum limit of risk the Group can withstand without causing its failure? How much risk is the Group prepared to take per risk type or business unit? What level of risk is deemed acceptable by the Board in pursuing its stategy? 164 Accountabi l i t y Leader ship Financ ial Statement s ěȃlj {ɨɁʍɥԇɰ ɨȈɰȟ ǼɁʤljɨȶƃȶƺlj ƃɥɥɨɁƃƺȃ Ȉɰ ɥɨljȴȈɰljǁ Ɂȶ ɽȃlj ѶӸ¸Ȉȶljɰ Ɂǹ Aljǹljȶƺlj ɥɥɨɁƃƺȃ ƹʰ ɥȢƃƺȈȶǼ ƃƺƺɁʍȶɽƃƹȈȢȈɽʰ ƃȶǁ ownership of risks to where they arise while maintaining the level of independence among risk taking units, risk control units and independent assurance unit in managing risk. Risk Appetite ƺɨȈɽȈƺƃȢ ƺɁȴɥɁȶljȶɽ Ɂǹ ɽȃlj {ɨɁʍɥԇɰ ĄȈɰȟ ÃƃȶƃǼljȴljȶɽ yɨƃȴljʥɁɨȟ Ȉɰ ɽȃlj {ɨɁʍɥԇɰ ɨȈɰȟ ƃɥɥljɽȈɽlj ǹɨƃȴljʥɁɨȟӗ ʥȃȈƺȃ ljȶƃƹȢljɰ the Board and Management at all levels to communicate, understand and assess the types and level of risks that the Group is willing to accept in pursuing its strategies. The Group’s risk appetite has been integrated into its Corporate Direction and 9ʍɰȈȶljɰɰ ĀȢƃȶ ƃȶǁ Ȉɰ ƺȃƃȶǼljƃƹȢlj ƹƃɰljǁ Ɂȶ ƹʍɰȈȶljɰɰ ƃȶǁ ȴƃɨȟljɽ ƺɁȶǁȈɽȈɁȶɰӝ Žɽ Ȉɰ ǁljɽljɨȴȈȶljǁ ƹƃɰljǁ Ɂȶ ɽȃlj ǹɁȢȢɁʥȈȶǼ ljȢljȴljȶɽɰӖ Ӵ ȀǵȮǒȮȻȮ ȀDž ¥ǒȮǧ rƃǵƃdžƭdzƭǵȻ 'ǒɚǒȮǒȀǵ ԐǒǵƟǪɃƦǒǵdž ǍƃȦǒƃǍ ¥ǒȮǧ rƃǵƃdžƭdzƭǵȻԑӹ ȦƭƦǒȻ rƃǵƃdžƭdzƭǵȻ 'ǒɚǒȮǒȀǵӹ ȀdzȣǪǒƃǵƟƭ 'ǒɚǒȮǒȀǵ ԐǒǵƟǪɃƦǒǵdž ǍƃȦǒƃǍ ȀdzȣǪǒƃǵƟƭԑ ƃǵƦ SǵDžȀȦdzƃȻǒȀǵ ƭƟɃȦǒȻɡ ֕ GȀɚƭȦǵƃǵƟƭ 'ǒɚǒȮǒȀǵ ԐSG'ԑӾ The Group takes steps to ensure that trigger levels, limit structures and delegated authorities are re-aligned and potential risk appetite implications are considered in all major resource allocation decisions. In setting the risk appetite of the Group and to enhance the Group’s risk adjusted returns, the discussion of risks is from the point of view of optimising the Group’s ɨȈɰȟӸɨljɽʍɨȶ ɥɨɁǹȈȢlj Ȉȶɰɽljƃǁ Ɂǹ ԆȢɁɰɰ ȴȈȶȈȴȈɰȈȶǼԇӝ THREE LINES OF DEFENCE APPROACH Internal Audit ĄljɰɥɁȶɰȈƹȢlj ǹɁɨ ɥɨɁʤȈǁȈȶǼ Ȉȶǁljɥljȶǁljȶɽ ƃɰɰʍɨƃȶƺlj ɽɁ 9Ɂƃɨǁ ƃȶǁ ČljȶȈɁɨ ÃƃȶƃǼljȴljȶɽ ɽȃƃɽ ĄȈɰȟ ÃƃȶƃǼljȴljȶɽ ĀɨɁƺljɰɰljɰ ƃȶǁ ěɁɁȢɰ ƃɨlj ljǹǹljƺɽȈʤljȢʰ implemented. Risk Control Units* ĄljɰɥɁȶɰȈƹȢlj ǹɁɨ ljɰɽƃƹȢȈɰȃȈȶǼ ƃȶǁ ȴƃȈȶɽƃȈȶȈȶǼ ĄȈɰȟ ÃƃȶƃǼljȴljȶɽ yɨƃȴljʥɁɨȟӢ ǁljʤljȢɁɥȈȶǼ ĄȈɰȟ ÃƃȶƃǼljȴljȶɽ ěɁɁȢɰӢ ƃɰɰljɰɰȈȶǼӗ ȴɁȶȈɽɁɨȈȶǼӗ ɨljɥɁɨɽȈȶǼ ƃȶǁ controlling risk; and promoting risk awareness across the Bank. Risk Owner or Risk Taking Units ĄljɰɥɁȶɰȈƹȢlj ǹɁɨ ɁȶǼɁȈȶǼ ɁʤljɨɰȈǼȃɽ Ɂǹ ɨȈɰȟ ծ ƺɁȶɽɨɁȢ ƃɽ ǁƃʰӸɽɁӸ day work level and promoting strong risk culture within business/support unit. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK