MITIGATION • Streamlining compliance Policies & Procedures to ensure robustness across the Group whilst localising at subsidiary level to address respective regulators’ requirements. • Compliance risk management tools are deployed to ensure a more proactive and vigilant management of regulatory risk. • Establishment of Foreign Exchange Policy (FEP) helpdesk to ensure compliance with foreign exchange requirements. • More robust onboarding process which ensures the Outsourcing Service Providers (OSPs) share the Group’s vision and commitment in championing VBI and ESG initiatives. • Training and continuous up-skilling on key emerging risk including products and parameters as well as publication of learning and awareness materials to all staff. • Implemented the Financial Risk Advisor (FRA™) System for BIMB Securities to manage end to end risk to ensure agility and efficiency of a business performance. • Embarked on a new robust Anti Money Laundering (AML) System for the Group to mitigate, prevent, detect and respond to evolving money laundering, terrorist and proliferation financing activities. • All issues and non-compliance are highlighted to the GCEO’s Office and deliberated at the Management and Board Risk Committee. MITIGATION • Developing and implementing an ESG risk framework covering identification, mitigation and monitoring of climate change risk; in line with the BNM’s Climate Risk Management and Scenario Analysis policy document. • Implementation of the BNM Climate Change Principles-based Taxonomy (CCPT) to classify financing exposures according to severity of climate risk. • Conducting selective ESG due diligence of new and existing financing customers that carry elevated climate risk indicators based on sector and business activity. • Implemented exclusion policy in the Group’s risk appetite statement, i.e. to phase out and exit from the coal sector by 2030. 7 8 REGULATORY/COMPLIANCE RISK CLIMATE RISK DEFINITION Risk of legal or regulatory sanctions, material financial loss, or reputational loss suffered as a result of failure to comply with the laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to BIMB’s banking activities. DEFINITION Risk arising from the effect of climate change on the Group’s operations and to its customers. These include physical risks that are chronic in nature including extreme weather events such as heat waves, droughts, floods, typhoons, and acute in nature that bring long-term shifts in climate patterns such as sea level rise and sustained temperature increase. Climate risk includes transition risk that entails changes in policies, investments, and business strategy such as carbon taxation that may negatively impact segments that are carbon-intensive or unable to adapt in a timely manner. Bank Islam Malaysia Berhad 51 Management Discussion and Analysis 01 05 03 07 02 06 09 04 08
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