NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 283 OUR SUSTAINABILITY APPROACH HOW WE ARE GOVERNED FINANCIAL STATEMENTS SHAREHOLDERS’ INFORMATION ADDITIONAL INFORMATION 51. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) Impairment assessment (cont’d.) Expert judgement Expert credit judgement is used to complement the assumptions made in the absence of sufficient data during the model development process and incorporation of forward-looking element over a range of possible scenarios into the ECL. The exercise of such judgement, together with any separately-calculated adjustments to the results to address limitations in the core modelling approach - will require particular attention in the governance process. Therefore, the use of expert judgement shall be applied as and when necessary and shall be governed by the following: I. All expert judgements need to be properly documented and backed by reasonable and supportable information that is available without undue cost or effort. II. Any expert judgement including new proposal, changes or updates, is required to be endorsed in accordance with the governance process as stipulated in this Framework. III. The Group and the Bank intend to apply expert judgement including but not limited to below areas: a. Definition of macroeconomic scenario and its probability for ECL measurement; b. Assumptions made during modelling process in relation to ECL due to data limitations; and c. Others as decided by relevant committee. IV. Any management adjustment made shall be tabled to Group Credit Committee for concurrence. Risk concentration: maximum exposure to credit risk without taking account of any collateral and other credit enhancement The Group’s and the Bank’s concentration risk is managed by counterparty and by industry sector. The Group and the Bank apply single counterparty exposure limits to protect against unacceptably large exposures to single counterparty risk. The following table shows the maximum exposure to credit risk for the components of the statement of financial position, including derivatives, by industry before the effect of mitigation through the use of master netting and collateral agreements. Where financial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. The maximum exposure to credit risk for the components of the statement of financial position, including derivatives, by geography before the effect of mitigation through the use of master netting and collateral agreements is not presented as the Group’s and the Bank’s activities are principally conducted in Malaysia.
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