Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

Group Business& Risk Review (Contd.)VALUE AT RISK2009US$ Millions2008US$ MillionsAverage 0.46 0.54Minimum 0.19 0.23Maximum 1.82 1.19VaR limits are delegated (should this be: assigned) by the Board to the Group Asset and Liability Committee (GALCO) and passed on to theGroup’s subsidiaries.The Group recognizes that VaR is based on the assumption of normal market conditions and that certain market shocks can result in lossesgreater than anticipated. Therefore, a strict limit structure and control process is adopted to effectively manage market risks and monitordaily position limits and stop losses. Additionally, supplementary risk management techniques, such as stress testing, form a core part ofthe Group’s risk control processes.LIQUIDITY RISKLiquidity risk is the risk of being unable to meet the Bank’s cash commitments without having to raise funds at unreasonable prices orsell assets on a forced basis. It is measured by estimating the Group’s potential liquidity and funding requirements under different stressscenarios.The Group’s liquidity management policies and procedures are designed to ensure that funds are available under all circumstances tomeet the funding requirements of the Group, not only under adverse conditions but at levels sufficient to capitalize on opportunities forbusiness expansion.A prudent mix of liquidity controls, based on expected economic and Group specific events, substantially ensures access to liquiditywithout the need to increase cost. It also provides for the maintenance of a stock of liquid and marketable assets and an adequatelydiversified deposit base in terms of maturity profile and number of counter parties.The Group Risk Management function continuously monitors liquidity risk and actively manages the balance sheet to control liquidity.At the subsidiary level, the respective treasury function manages this risk with monitoring by the Risk Management department andunder the jurisdiction of its Assets and Liabilities Committee (ALCO). At the Group level liquidity risk is managed by the Group Assets andLiabilities Committee (GALCO), which is vested with the overall day-to-day responsibility for all matters relating to Group liquidity.OPERATIONAL RISKAUB defines Operational Risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or fromexternal events.It is noted that no material losses occurred in 2009, however, due to nature of the risk, there is no assurance that this risk can be totallyeliminated.Operational risk is managed by the Group Operational Risk Committee (GORC). The Group adopts an ongoing Operational Risk Self-Assessment (ORSA) process in accordance with best practice. Assessments are made of the operational risks facing each function withinthe Bank and these are reviewed regularly to monitor significant changes. Operational risk loss data is collected and reported to seniormanagement on a regular basis.38 AUB Annual Report 2009

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