RISK IMPACT Low Moderate High Very Significant RISK TREND INCREASE DECREASE STABLE Opportunities Arising from this Risk To diversify depositor and funding profile by adapting to market developments and depositor behaviours. To be more efficient in funding acquisition operations and improve cost structures. Focus on improving customer experience to enhance customer retention and acquisition. Description Risk of adverse impact to the financial condition and soundness of the Group arising from inability (or perceived inability) to meet our contractual obligations. Response and Mitigating Actions Maintain a comprehensive liquidity risk policy and limits aligned with best practices. Proactively assess, monitor, analyse, manage and report to ensure effective liquidity risk management within approved Risk Appetite, business strategy and current economic environment. Preserve high-quality liquid assets, term mismatch management to avoid significant maturity mismatches that could amplify liquidity risk and diversify funding source s as a liquidity risk buffer under both business-as-usual (BAU) and stress conditions. Conduct regular and ad-hoc stress testing and scenario analysis to identify potential liquidity strain and ensure alignment with the Group’s risk tolerance. Establish a robust liquidity crisis management plan and a viable contingency funding plan. Promptly and accurately report all exposures, non-compliances, and emerging risks to Management and Board Committees. Keep abreast of market and regulatory developments which impact the Group’s liquidity risk metrics and make recommendations for suitable changes. How does this impact us? Funding at higher costs or disposal of liquid assets may impact the Group’s profitability and capital. LIQUIDITY RISK Opportunities Arising from this Risk Improve operational efficiency to elevate customer experience and engagement. Leverage on digitalisation and automation capabilities to intensify the Group’s ability to efficiently service our customers. Description Risk of loss resulting from inadequate or failed internal processes, people, and systems, as well as from external events which may negatively impact the Group’s financial performance and reputation. Response and Mitigating Actions Maintain and actively manage operational risk following the Group’s operational risk policy and Risk Appetite. Establish Embedded Risk Units to actively monitor operational risks across the Group. Proactively review and manage critical business functions and essential services to ensure timely recovery in the event of disruptions. Utilise various Operational Risk Management (ORM) tools, including both proactive and reactive strategies, to ensure robust, resilient, and consistent risk management. Promptly report all operational risk issues and incidents (including Shariah noncompliant (SNC)) to Management and Board Committees, with detailed root cause analysis and action plans. Provide operational risk training and awareness programme to promote a strong risk culture within the Group. How does this impact us? Group’s ability to provide essential financial services to resiliently service customers may be affected resulting in operational losses as well as erosion of stakeholders’ confidence and trust in the Group. OPERATIONAL RISK 57 1 2 3 4 5 6 7 8 9 www.bankislam.com MANAGEMENT DISCUSSION AND ANALYSIS – STRATEGIC REVIEW
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