Untitled - Saxo World

NOTES – saxo bank risk managementthe potential impact of a loss event. Wherever relevantand possible, business units report operational errors andrelated losses on a daily basis. The operations error orincidents are captured in a central loss register.OrganisationThe risk management set-up, including roles and responsibilities,is documented and described.PolicyOperational risk has been implemented to be able to supportan ‘Internal Capital Adequacy Assessment Process’(ICAAP). The requirements and guidelines concerning operationalrisk within the Bank are captured in the relevantICAAP documentation.Liquidity RiskLiquidity risk is defined as the risk of only being able tomeet liquidity commitments at increased cost or, ultimately,being unable to meet obligations as they fall due.The Bank monitors the liquidity risk on a regular basis andaims to maintain a positive stable funding. The risk managementfocuses on both short-term and long-term structuralliquidity risk, and employs a policy of excess cashplacement in short term prime grade bonds, securing theBank’s ability to meet obligations as they fall due. TheBank’s ability to meet obligations is also strengthened byits non-lending policy. Thus, Saxo Bank has not been exposedto the liquidity challenges generally seen in the financialsector during the financial crisis.The Bank monitors its liquidity reserves as well as the durationon collateral placement daily.Business RiskBusiness risks include types of risk related to the macroenvironment,the competitive environment within thebanking industry and Saxo Bank related circumstances.Examples could be changes in the economic environment,the legislative environment, the political environment orfailure of a cost intensive business project.The key potential business risks are identified, assessedand discussed as part of the ICAAP process using thesame likelihood and impact scale as applied in the assessmentof operational and legal & compliance risks. The resultof the assessment is subsequently analysed throughanalyt ical approaches including scenario analyses andMonte Carlo simulations.In addition, a Black Swan function facilitates regular meetingsaiming at discussing key elements of the Bank’s currentrisk landscape. The goal is together with key managersand selected external participants to challenge thecurrent views about the future business environment anddiscuss potential alternative scenarios and relevant responses.ANNUAL REPORT 2009 · SAXO BANK · 71