RISK APPETITE The risk appetite defines the levels of risk that the Group is willing to assume within its risk capacity. It is a critical component of the Group’s ERM Framework, which enables the Board and Management at all levels to communicate, understand and assess the types and levels of risks that the Group is willing to accept in pursuit of its strategic and business goals while taking into consideration the constraints under a stressed environment. The Group’s risk appetite has been integrated into its Corporate Direction and Business Plan and remains dynamic and responsive to the changing external and internal drivers such as the business and market conditions. It is determined based on the following elements: 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 riskreturn profile. Guided by these principles, our risk appetite is articulated through a set of Risk Appetite Statements across the Group to ultimately balance the strategic objectives of the Group. RISK MANAGEMENT PROCESS A standard risk management process has been adopted by the Group to ensure that Group-wide risks are properly identified and managed across all products and activities undertaken in a structured, systematic and consistent manner. The risk management process is as follows: Risk Capacity • What is the maximum limit of risk the Group can withstand without causing its failure? 1 Risk Tolerance • How much risk is the Group prepared to take per risk type or business unit? 2 Risk Appetite • What level of risk is deemed acceptable by the Board in pursuing its strategy? 3 Step 1: Risk Identification Step 3: Risk Control & Mitigation Step 2: Risk Assessment Step 4: Risk Monitoring & Reporting RISK MANAGEMENT PROCESS Under this approach, active involvement of the Board, Senior Management and staff of all levels are required in the risk management process to ensure a uniform view of risks across the Group. Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2024 248 Statement on Risk Management and Internal Control
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