Credit risk may lead to a deterioration in financial asset quality, reduce profitability and capital reserves, potentially weakening investor and depositor confidence. How Does This Impact Us? Market volatilities may cause fluctuations in Group’s asset value, profitability and capital. How Does This Impact Us? CREDIT RISK MARKET RISK Outlook With the global economic uncertainties and slower domestic economic growth, the Group’s credit exposures are expected to remain manageable, with asset quality to remain solid within its risk tolerance level. The Group will continue to adopt a cautious approach by enhancing credit underwriting standards and policies to ensure effective management of credit risk. Outlook The market risk exposure is expected to increase mainly due to uncertain global and local economic uncertainties. However, in line with the Group’s approved business strategies and risk appetite, the Group’s exposure will be managed within the approved Board limits. Description Risk of potential losses to the Group arising from inability of customers to fulfil contractual obligations under facilities granted by the Group. Description Risk of potential losses arising from adverse movements in market prices or rates such as profit rates, foreign exchange rates, credit spreads, equity prices and any other activities undertaken by the Group in the financial markets. Response and Mitigating Actions • Maintain a robust and prudent credit risk policy as well as Risk Acceptance Criteria (RAC), risk tolerance and loss triggers to manage credit risk. • Leverage on Credit ratings and scorecards for optimal decision making on customer’s creditworthiness. • Conduct granular risk analysis on consumer portfolio to ascertain its alignment with the business approved strategy and Board approved RAS. • Regularly conduct independent post-credit reviews and post-mortem analyses to assess and maintain asset quality standards. • Proactively and vigilantly manage accounts for early detection of red flags to prevent deterioration in asset quality in line with the Group’s Watchlist Guidelines. • Promptly and accurately report all exposures, non-compliances, and emerging risks to Management and Board Committees. Response and Mitigating Actions • Maintain a robust market risk policy and limits based on best practices. • Proactively review the market risk controls to cater for the anticipated changes in the Group’s business strategy and risk profile. • Conduct regular and comprehensive stress testing to identify potential risks and ensure the Group’s exposure remains within its risk tolerance. • Keep abreast of market and regulatory developments which impact the Group’s market risk metrics and make recommendations for suitable changes. • Constructively challenge the first line of defence. • Promptly and accurately report all exposures, non-compliances, and emerging risks to Management and Board Committees. Opportunities Arising From This Risk • Continuously refine prevailing credit processes and financing responsibly. • Selectively grow the Group’s portfolio to ensure sustainability in line with risk appetite. • Enhanced credit risk management minimises credit losses and improves asset quality by adapting to dynamic changes in the market. Opportunities Arising From This Risk • Introduce alternative solutions, navigate the volatilities in the market. • Nimble in responding to adverse risk scenarios in the market and lead changes where necessary to adapt to market volatilities. CR MR Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2024 58 Key Risks and Mitigations
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