INTERNAL CONTROL SYSTEM The Board has established an internal control system to provide an effective governance and oversight which include the following key components: • Group Organisational Structure An organisation structure with clearly defined lines of responsibility and accountability has been established in line with the business and operating requirements to support a strong control environment. • Annual Business Plan and Budget All key operating divisions are involved in the preparation of the annual business plan and budget, taking into consideration the established risk appetite. They will have to go through a challenge session with the Management before the proposal is deliberated by the Board for approval. The Board regularly reviews the performance achievements and any revision to the business plan and budget will be re-tabled for the Board’s approval. • Authority Limits There is an Authority Limits document in place which outlines the approving authority and the approving limits to the respective Management Executive Committees as well as to the relevant Head of Division. The Authority Limits document is reviewed regularly to ensure efficiency and control. The Authority Limit document is approved by the Board and changes to any limit therein are also approved by the Board. • Oversight by the Board Audit & Examination Committee (BAEC) The BAEC was established to assist the Board in ensuring a reliable and transparent financial reporting process and internal control system are in place within the Group and provide an independent oversight into the effectiveness of the internal and external audit functions. Material control lapses are escalated to the BAEC for deliberation. The BAEC also deliberates on any unresolved audit findings to ensure the Management undertakes the relevant remedial actions within the timeline. The BAEC further performs oversight to ensure proper disclosure and management of conflict of interest. Details of the activities undertaken by the BAEC are highlighted in the BAEC Report as set out on pages 237 to 243 • Oversight by the Board Risk Committee (BRC) The BRC assists the Board in ensuring that a sound and robust risk management framework as expected by BNM is in place and effectively implemented. The BRC provides an independent oversight on the Management’s activities in managing credit risk, market risk, liquidity risk, nonfinancial risk (which includes legal risk, compliance risk, Shariah non-compliance risk, technology & cyber risk and business continuity risk), sustainability risk (including climate-related risk) and other relevant risk and to ensure that the risk management process is in place and functioning for the Group. Further information on the roles and responsibilities of the BRC can be found in Section B of the Corporate Governance Report (CG Report) which is available on Bank Islam’s corporate website at www.bankislam.com • Oversight by the Board Nomination and Remuneration Committee (BNRC) The BNRC was established to support the Board in overseeing the appointments, removals, performance evaluations as well as fit and proper assessments of the Board members, Shariah Supervisory Council (SSC) members and key senior management, including the Company Secretary. The committee also has an oversight function pertinent to the review of remuneration of the Board members, SSC members and senior management. The primary objective is to ensure that these policies and procedures are in compliance with regulations such as the Bank Negara Malaysia Corporate Governance Policy, MMLR, and Malaysian Code on Corporate Governance. Further information on the roles and responsibilities of the BNRC can be found in Section B of the CG Report which is available on Bank Islam’s corporate website at www.bankislam.com • Oversight by Other Board Committees There are other Board Committees established to assist the Board in discharging its overall governance responsibilities and oversight functions. These Board Committees are the Board Financing Review Committee (BFRC), the Board Strategic & Sustainability Committee (BSSC) and the Board Information Technology Committee (BITC). The Board has delegated these Board Committees the authority to review all matters within the scope defined in their respective Terms of Reference and make relevant recommendations to the Board. Further information on the various Board Committees can be found in Section B of the CG Report which is available on Bank Islam’s corporate website at www.bankislam.com 255 www . b a n k i s l am. c om 01 02 03 04 05 06 07 ACCOUNTABILITY 08 09
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