Description

Duties and Responsibilities The Chief Risk Officer (CRO) should report and have direct access to the Board of Supervisors or its risk committee without impediment. The CRO should have the ability to interpret and articulate risk in a clear and understandable manner and to effectively engage the board and management in constructive dialogue on key risk issues. Interaction between the CRO and the board and/or risk committee should occur regularly, and the CRO should have the ability to meet with the board or risk committee without executive directors being present. Risks should be identified, monitored and controlled on an ongoing bank-wide and individual entity basis. The sophistication of the bank’s risk management and internal control infrastructure should keep pace with changes to the bank’s risk profile, to the external risk landscape and in industry practice. Risk identification should encompass all material risks to the bank, on- and off-balance sheet and on a group-wide, portfolio-wise and business-line level. In order to perform effective risk assessments, the Board and senior management, including the CRO, should, regularly and on an ad hoc basis, evaluate the risks faced by the bank and its overall risk profile. The risk assessment process should include ongoing analysis of existing risks as well as the identification of new or emerging risks. Risks should be captured from all organizational units. Concentrations associated with material risks should likewise be factored into the risk assessment. Risk identification and measurement should include both quantitative and qualitative elements. Risk measurements should also include qualitative, bank-wide views of risk relative to the bank’s external operating environment. Banks should also consider and evaluate harder-to-quantify risks, such as reputation risk. Information should be communicated to the Board of Supervisors and Board of Management in a timely, accurate and understandable manner so that they are equipped to take informed decisions. While ensuring that Board of Supervisors and Board of Management are sufficiently informed, management and those responsible for the risk management function should avoid voluminous information that can make it difficult to identify key issues. Rather, information should be prioritized and presented in a concise, fully contextualized manner. The board should assess the relevance and the process for maintaining the accuracy of the information it receives and determine if additional or less information is needed. Risk reporting systems should be dynamic, comprehensive and accurate, and should draw on a range of underlying assumptions. Banks should avoid organizational “silos” that can impede effective sharing of information across an organization and can result in decisions being taken in isolation from the rest of the bank. Overcoming these information-sharing obstacles may require the Board of Supervisors, Board of Management and control functions to re-evaluate established practices in order to encourage greater communication. Risk Management Functions: Policies & Procedures Propose policy implications for risk management to the BOS based on laws, regulations, and internationally accepted standards. Draft, amend, improve, and propose policies and procedures for risk management. Pursue the risk management objectives in line with the policies & procedures, and size & complexity of the bank business. Risk Measurement Tools Develop and improve internal rating system for measuring risks associated with fund-based and non-fund-based exposures. Develop risk grading metrics for country risk and correspondent institutions risk. Develop monitoring tools for various risks in accordance with internationally accepted norms and practices. Regulatory Framework & Limits Setting prudential limits and thresholds based on risk appetite of the bank in the policy documents. Tracking and monitoring the state of adherence to prudential limits and thresholds stipulated in the internal policies of the bank. Study on applicability of the international norms and best practices to align the practice in the local context of Afghanistan. Credit Risk Study of exposures in respect to single party/large exposure against regulatory and policy benchmarks, Study of credit concentration with respect to sector, geography, and products, Periodic analysis of distressed assets and reporting to the BOS. Market Risk Develop tools for deposit mix/liability quality analysis, including deposit concentration analysis, Develop liquidity risk monitoring and reporting tools, Review & study of country risk exposures against limits set, including positions of NOSTRO and correspondent banks. Review & monitoring of open forex position and currency concentration. Operational Risk Strong knowledge and experience of operational risk and its measurement Regular review and monitoring operational risk in all branches of the bank, Periodic reporting of operational events to BOS and develop tools for risk identification, management, and reporting. Corporate Governance Risk Periodic risk assessment of departments to ensure a transparent and efficient governance of the bank, including efficiency of policies, procedures, workforce capacity, and so on, Provide advice to the management on potential risks in decisions made, Ad hoc analysis of risks associated with the decisions made in the management level.