Corporate governance system
Development Bank of Kazakhstan
R I S K M A N A G E M E N T SY STEM
Risk management at the Development Bank is an integral part of the
corporate culture of the Development Bank and plays an important role
in the strategic decision-making. Risk management is carried out at all
levels in accordance with the recommendations of Basel II agreement
and the requirements of the national regulator.
Development Bank’s Board of Directors approves the main policies
and regulations governing the process of risk assessment and risk
management in the Development Bank, and the Risk Management
Committee, created under the Board of Directors, assists the Board of
Directors in fulfilling its oversight responsibilities for the operation of
adequate and effective risk management system in the Development
Bank. The Audit Committee considers the issues regarding the internal
and external audit of the Development Bank.
Threemainexecutivecommitteesoperateformanagement
88
of risks, assets and liabilities at the Development Bank:
• Asset and Liability Management Committee (ALCO);
• Credit Committee;
• Investment Committee.
The corresponding structural departments ensure
constant improvement of the risk management system,
independent assessment and monitoring of risks. Internal
Audit Service evaluates the adequacy and effectiveness of
risk management and internal control
systems, makes
recommendations for improvement of the Development Bank
activity.When building a corporate risk management system,
the Development Bank is guided by the following principles:
creation and protection of share capital value – effective risk
management allows the Bank to create and protect the value
of equity in order to achieve
Corporate governance system
RI SK M A N A G E M E N T STRU CTU R E
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strategic and operational objectives;
inalienability in all organizational processes – risk management is an
integral part of all organizational processes and is the responsibility
of each structural subdivision or employee of the Development Bank;
inalienability of the decision making process – risk management
helps to make informed decisions and prioritize actions;
Work with uncertainty – risk management is used to reduce the level
of uncertainty, determine the nature of this uncertainty and to take
measures to reduce the level of uncertainty;
systematicity, structuredness and timeliness – a
systematic,
structured and timely approach to risk management contributes to
improving the efficiency and generates reasonable confidence in the
results;
MANAGEMENT BOARD
A N D THE C O L L E G I A L B O D I E S
MANAGEMENT BOARD
AND
THE
BOARD OF
O F THE
S U B D I V I S I O N S O F THE B A N K ’ S R I S K
MANAGEMENT
INTERNAL AUDIT SER V IC E
OTHER STRUCTURA L
S U B D I V I S I O N S O F THE B A N K
• awareness- input data for the risk management process is based on the best
available information sources. Members of the corporate risk management
system must understand and consider the limitations and drawbacks of the
quality of input data;
• adaptability – approaches to risk management shall match the level of risk of
external and internal environment;
• transparency and comprehensiveness – approaches to risk management must
be open, transparent and accessible to all members of the corporate risk
management system. Approaches of risk management shall be meaningful and
comprehensive;
• responsiveness and iterativeness – risk management is a continuous and
iterative process, tracking changes and quickly reacting to changes;
Annual report 2015
1
THE B O A R D O F D I R E C T O R S
COLLEGIAL BODIES OF THE
DIRECTORS
Corporate governance system
Corporate governance system
• continuous improvement – risk management shall be used to improve all the
processes of activity. The Development Bank is constantly improving its corporate
risk management system.
For the purposes of its operation, the Development Bank groups risks as follows:
RISKS “DEVELOPMENT BANK O F
KAZAKHSTAN
MACROECONOMIC
External environment
POLITICAL
Annual report 2015
Development Bank of Kazakhstan
DEVELOPMENT BANK’S CLASSIFICATION OF RISKS
Internal environment
Financing
Non-financing
Concentration risk
Operational risks
Credit risk
Yield curve risk
Strategic risks
INDUSTRY R I S K
Business risks
Interest risk
Legal risks
COUNTERPARTY RISK G R O U P
Liquidity loss risk
Currency risk
Compliance risks
Equity risk
Reputational risks
COUNTRY R I S K
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Development Bank of Kazakhstan
Corporate governance system
The activities of the Development
Bank are exposed to major risks related
to the lending process, adverse
fluctuations in exchange rates and
interest rates, and others.
The Development Bank is exposed to
market risks from open positions in
interest rate and currency, maturity
mismatch of assets and liabilities,
subject to risk of changes in market
conditions. Market risk management at
the Development Bank is carried out
through periodic estimation of potential
losses from adverse changes in market
conditions and establishing
and
maintaining
appropriate
stop-loss
limits and requirements for the rate of
profit. The Collegial Body
of the
Development Bank, in charge of market
risk management, is the Management
Board and ALCO.
Credit risk is the risk of financial loss
occurring as a result of default by a
borrower or counterparty on its
obligations to the Development Bank.
The Development Bank developed a set
of internal regulations and established
regulated credit risk management
procedures, including the requirements
to establish and
comply with
concentration limits of the loan
portfolio. In order to measure the credit
risk
the
Development
Bank
implemented and uses a model for
calculating the
internal rating of
borrowers based on the methodology of
Standard&Poor’s international rating
agency.
The Development Bank Memorandum
of Credit Policy provides a multi-stage
system of collegial decision- making by
the
authorized
bodies
(Credit
Committee, Management Board, Board
of Directors) to grant
credit
instruments depending on the size of
the credit instrument.
The Development Bank constantly
monitors the status of each loan and
regularly
analyzes
the
financial
condition and creditworthiness of its
borrowers. Review of the credit risk is
based on an analysis of the borrower’s
financial statements, implementation of
investment
projects and export
transactions, leasing transactions and
other project information.
Apart from individual customer
analysis structural subdivisions, whose
responsibilities include it, assess the
loan portfolio as a whole in terms of
loan concentration.
On
a
continuing
basis
the
Development Bank pays
special
attention to the analysis and control of
all of its risks that could have an impact
on achieving long-term
strategic objectives and key
performance indicators of the Action
Plan, approved by the Board of
Directors.
A plan of measures to minimize the
risks is developed and approved as part
of the risk management system, both aimed at eliminating the causes of implementation
risks and minimizing the consequences in case of realization of risk events.
A register and matrix of risks and controls of the Development Bank business processes
undergoes a mandatory review and update process on an
annual basis. A risk map is
developed on the basis of the risk matrix.
More detailed information about the Development Bank’s risk management is reflected in
the notes to the consolidated financial statements of the “Development Bank of
Kazakhstan” JSC.