Ready for Breakthrough - Techcombank

Risk Management
Risk Management
Introduction
Credit Risk
Effective risk management is imperative to
Techcombank as all banking activities involve, in
various degrees, the acceptance and management
of risk. The principal risk exposures of Techcombank
are Credit Risk, Operational Risk, Market Risk
and Liquidity Risk. The management of these risk
categories is discussed below.
Governance and Ownership
Techcombank takes a holistic approach to risk
management whereby the important categories of
risk described above are centrally managed within
the Risk Management Department headed by the
Chief Risk Officer. The Chief Risk Officer reports to
the Chief Executive Officer and is independent of the
business line.
Risk Appetite
In 2009, Techcombank initiated the risk appetite
framework defining the level of risk it is prepared
to accept in regular business operations. The risk
appetite is essential to executing Techcombank’s
profitable growth strategy. The formulation for risk
appetite takes into consideration Techcombank’s
strengths, as well as the business and demographic
segments that Techcombank operates in. It defines
the risk parameters and raises the issue of acceptable
risk levels so that risk mitigation can be developed
prior to embarking on various business mix.
The credit risk management framework is structured
into three segments: Corporate & SME Risk, Financial
Institution Risk and Retail Risk.
Corporate and SME Risk
The Corporate and SME risk assessment is pivotal to
the development of credit portfolio policies and credit
re-assessments in the Corporate and SME business
sectors. During 2009, more than 10,000 loan
applications were re-assessed, which constituted
over 50% of all corporate clients’ credit applications.
This contributed strongly to credit growth while
controlling risk exposure. The approval team also
handled a substantial number of credit approvals for
retail customers.
The Bank closely monitors its credit portfolio and
regularly reviews its policies, helping to set regulatory
guidelines for its credit operations. Credit portfolio
management closely monitors and provides report
on credit limits for individual customers and groups
of related customers. Techcombank’s exposure to a
number of industries/fields such as steel, fertilizers,
shipbuilding, real estate & construction, livestock
feed, agricultural produce (rice, cashews, coffee) are
closely monitored and reported.
Financial Institution (FI) Risk
The recent global financial crisis has led to unforeseen
implications on the international Financial Institutions
sector. In response, Techcombank implemented a
strategy to prioritize management of counterparty
risks. The FI Risk Team developed a rigorous risk
management framework to identify, assess and
measure FI risks. The department has calculated
risk appetite, created internal credit scoring systems,
credit policies and guidelines for FI customers
to ensure counterparty risks will be continuously
monitored.
Retail Risk
The Retail Risk Team is responsible for developing
the risk framework, policy, analysis and strategy as
well as collaborating with the Retail Product Team
to drive profitable lending growth. The objective is
to manage risk throughout the customer credit life
cycle including:
Planning and Product Development In 2009,
the Retail Risk Team partnered with the Retail
Product Team in its initiative to review all its
lending products to ensure they are in line with
the risk appetite. The objectives are to identify and
limit the growth of high risk products, enhance risk
mitigation to ensure profitable growth for medium
risk products, and identify lower risk segments
to develop new products to serve the customers’
needs while growing profitable assets.
Customer Acquisition Assessment The credit
approval operation became centralized in late
2008, to achieve independence, enhance risk
control and consistency in credit decision while
increasing productivity. Centralized credit approval
is an international best practice and Techcombank
achieved it through the implementation of world
class technology.
Retail Risk Team partners with the Credit
Approval Team to initiate the streamlining of the
credit approval process, enhancing of lending
guideline, and staff training with an objective to
improve customer service and productivity while
further enhancing risk control.
Customer Management While Techcombank
is focused on customer acquisition to grow its
business, Retail Risk also partners with Retail
Product to ensure that customer management
strategy takes into account risk management.
This inclu des credit card reissue, customer cross
selling, top up loans and customer retention.
Collection and Recovery Robust collection
and recovery is essential to any lending growth
strategy. Retail Risk partners with the Collection
and Recovery Departments to enhance the
process with the objective to optimize the joint
venture between Collection and Recovery,
improve debt sales and outsourcing, obtain
important provision and write-off data for analysis
and reporting.
32 READY FOR BREAKTHROUGH TECHcOMBANK ANNUAL REPORT 2009 33