May negatively impact the Group’s operational resilience, in particular its ability to provide essential financial services to its customers resulting in financial and non-financial losses. These would eventually lead to erosion of stakeholders’ confidence and trust in the Group and its brand value. How Does This Impact Us? The risk may impact the Group’s profitability, capital and reputation. How Does This Impact Us? NON-FINANCIAL RISK STRATEGIC RISK Outlook With the rapid adoption of new technologies and the ongoing digital transformation of the financial sector, there has been a corresponding uptick in fraud and scam incidents. The NFR landscape remains moderate as emerging risks are being proactively identified, and key controls are continuously reviewed and strengthened to adapt to changes and to mitigate risk exposures. The Group proactively manages NFR through ongoing awareness programmes and enhanced risk frameworks to inculcate a deeper Risk Culture within the Group, especially in the areas such as Fraud, Third Party and Nth Party risk to strengthen operational and business resilience. Outlook Amidst the complexities and competitive business environment and rising challenges of the regulatory landscape, the Group will continue to keep its business strategies guided by the Board approved Risk Appetite and Budget. The Group is committed to ensuring continuous monitoring and mitigation of its strategic risk, through proactive risk management and effective engagement and collaboration throughout the organisation. Description Risk of loss resulting from inadequate or failed internal processes, people, and systems, as well as from external events. Description Risk arising from failure to execute the Group’s business direction and strategic objectives that aligns with the Group’s desired values as well as vision and mission and failure to effectively take actions to address underperformance. It may also arise from changes to the competitive landscape or regulatory framework or ineffective positioning in the macroeconomic environment. Response and Mitigating Actions • Utilise various NFR Management tools, including both proactive and reactive tools, to ensure robust, resilient, and consistent identification, assessment, management and reporting of NFRs. • Maintain and actively manage NFR following the Group’s NFR Management-related Policies and Risk Appetite. • Establish Embedded Risk Units within first line of defence to actively monitor NFRs across the Group. • Strengthen operational resilience management via comprehensive business continuity management framework to ensure that timely recovery of essential services in the event of unforeseen events or business disruptions. • New or variations of products and services and outsourcing arrangements are subject to systematic risk evaluation process to ensure relevant risks are identified and assessed. • Promptly and accurately report all NFR exposures, incidences and emerging risks to Management and Board Committees. Response and Mitigating Actions • Regularly monitor the execution of business strategies to assess the performance against strategic objectives and to ensure the Group remains on track to achieve targets. • Ongoing review, enhancement and monitoring of the business strategies against the Board approved Risk Appetite and Budget. • Conduct regular and adhoc stress testing including reverse stress testing and scenario analysis to identify potential risks and ensure the Group’s exposure remains within its risk tolerance. • Promptly and accurately report all exposures, non-compliances, and emerging risks to Management and Board Committees. Opportunities Arising From This Risk • Early detection and prevention of potential NFR incidents which minimises costly NFR events to the Group and improving operational efficiency. • Leverage on digitalisation and automation capabilities to intensify the Group’s ability to efficiently service its customers. • Enhance the Group’s reputation and brand value to customers due to its commitment to operational excellence and effective risk mitigation. Opportunities Arising From This Risk • Foster stakeholders’ engagement, support informed decision-making and allow the Group to seize value creation opportunities. • Innovate new products and services, enter new market and improve business processes. • Prioritise on market segments which generate higher return and less capital intensive. • Leverage on digitalisation and automation capabilities to intensify the Group’s ability to generate more revenue and serve customers more efficiently and effectively. • Enhance the Group’s reputation and brand value. NFR SR Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2024 60 Key Risks and Mitigations
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