2 jamaica money market brokers limited annual report ... - Jmmb.com

RISK MANAGEMENTManaging the Financial Risk: Risk Culture and Risk ManagementProcedure in the JMMB Group In JMMB, we believe that today’s rigorousfinancial risk management is the cornerstone of tomorrow’s growthand prosperity. The business we manage exposes the firm to various typesof risk, including market risk, liquidity risk, credit risk and other risks.Considering that all risks cannot be eliminated, the objective of the RiskManagement team is to identify, understand, disclose and manage risks.Consequently, in the Risk Management Department, our day-to-day jobis to measure, monitor and manage every type of risk with cutting-edgemethodologies and disciplined policies and procedures. Our foremostfunction is protecting the firm’s capital and stakeholders’ interest from ofimpact of adverse events. The Board of Directors and Senior Managementare fully aware of the importance of prudent risk management practices ofmodern financial institutions. At JMMB, there is a three-tier reportingstructure to ensure that the Board’s risk appetite is aligned with the businessrisk being taken (Appendix I). Being the highest level of accountabilityfor risk management in JMMB, the Board Risk Subcommittee reviews andapproves risk management policies, and delegates the operational authorityto the senior management team. The Risk Management Committee atthe senior management level serves as the platform to address any businessissues that may arise, check the firm’s capital level and risk exposures, andmake operational decision on behalf of the Board. The functional teamconsists of risk professionals that specialise in each specific risk sector.The responsibility of the functional team is the implementation of therisk policy and the monitoring of risk exposure in our dynamic businessenvironment.Market Risk Market risk is the potential loss resulting from adversemovements in the market values or yields of financial instruments thatJMMB owns. We use the Value at Risk (VaR) methodology to actively measuremarket risk exposure. Value at Risk is a statistical measure inferredfrom historical market data and current portfolio composition. It providesinformation about the potential loss based on certain probabilitiesfor a specified time frame. We combine the VaR approach with stress testingto understand the risk profile underlying the investment portfolio. Inaddition, JMMB is adopting the international standard, Basle Accord, toestablish an appropriate capital level in considering market risk. Based onthe predefined VaR limits related to the capital base, JMMB continues toeffectively control market risk.18 JAMAICA MONEY MARKET BROKERS LIMITED ANNUAL REPORT 2004