Disclosures to Promote Transparency and Market - IFSB

SECTION 5:
RISK MANAGEMENT, RISK EXPOSURES AND RISK MITIGATION
1. General Disclosures: Risk Exposures and Assessment
46. The risks to which IIFS are exposed, and the techniques they use to identify,
measure, monitor and control those risks, are important factors which market participants
consider in their assessment of an IIFS.
47. In this section, several key financing risks are considered: credit risk, equity
investment risk, 31 liquidity risk, rate of return risk, market risk and operational risk as
specified in the IFSB’s Guiding Principles of Risk Management for IIFS. In addition, some
disclosures on credit risk mitigation, DCR and facility-specific risks are peculiar to IIFS.
48. For each separate risk area, an IIFS shall describe its risk management
objectives, policies and practices, the structure and organisation of the relevant risk
reporting and measurement systems, measures and indicators of risk exposures, policies
for hedging and/or mitigating risk, and strategies and processes for monitoring the
continuing effectiveness of risk management tools and techniques such as hedging and
other risk mitigants.
31 Risk arising from entering into a partnership for the purpose of undertaking or participating in a particular
financing or general business activity as described in the contract, and in which the provider of finance
shares in the business risk, as defined in the IFSB’s Guiding Principles of Risk Management, December
2005.
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