Risk Management Department of Bank-e-Millie Afghan was established with the aim to safeguard the assets of the bank. The main objective of the risk management department is to maintain financial soundness and to avoid activities that could threaten the bank’s reputation. There are 3 main units functioning in the department.
1. Credit Risk Unit
2. Operational Risk Unit
3. Market Risk Unit
1. Credit Risk Unit: This unit of the department is responsible for overseeing and managing the most critical and intricate part of the risk management activities which contains credit risk analysis of proposals and loan portfolio risk management. The Credit Risk Unit is also responsible for conducting risk assessment in both pre- sanctioning and post sanctioning stages of lending process. At primary stage before any loans is disbursed, the credit risk unit shall analyze the borrower application, security documents , financial statements and business plans to establish the credit worthiness of the borrowers and price the loans in equivalence to the risk weights and ratings of the each borrower.
The credit risk unit shall be monitoring the loan portfolio covering all delinquent, Doubtful, Impaired and non-performing loans and the external and internal factors leading to deterioration of loans in the portfolio.
Credit Risk Management unit aims to preserve the high credit quality of the bank’s portfolio and thereby protecting the bank’s short and long term viability. The bank’s credit risk management is built on the following principles.
Appropriate risk diversification
Comprehensive risk assessment at the credit appraisal stage
Risk based pricing and risk mitigation
Continuous monitoring at the individual counterparty level as well as portfolio level
Avoidance of undesirable risks to the extent possible.
1. Operational Risk Unit: Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and system or from external events. The Operational Risk Unit is primary responsible for implementation and conducting Risk Control Self-Assessment (RCSA) Model. The unit shall perform following main duties,
To ensure that all areas of the banks operation is governed by standard policies and procedures
To ensure all policies and procedures of the bank is updated/reviewed annually.
To ensure the segregation of duties in each unit/department/branch does exist.
To ensure a proper internal control system/plan does exist.
To ensure a proper dual control system does exist in each unit/department/branch.
To ensure a proper succession planning for each unit/department/branch does exist.
To ensure that all the committees of the bank are functioning on the basis of standard charters, operating procedures and according to the corporate governance policy.
To closely monitor the operating cycles of the bank different departments within their field of business and ensure no departments are working without a job descriptions, operating procedure, annual action plan and strategic plan.
1. Market Risk Unit: Market risk is the risk of losses in on and off-balance sheet positions arising from the movements in the market prices. In broader sense the market risk covers Interest rate risk, Foreign exchange risk, Commodity prices risk and liquidity risk of the bank.
Market Risk Unit will be required to prepare reports on interest rate risk of the bank including asset and liability mismatch risk (gap analysis). The unit shall prepare an analysis report on investment/placement portfolio of the bank and ensures that the concentration risk is avoided in the portfolio of the bank. The unit also measure and monitor the liquidity risk and foreign exchange risk of the bank more frequently.