Annual Report 2013

note to the accounts
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Introduction
The Board has endorsed a policy of compliance and risk management to suit the risk profile of the Credit Union.
The Credit Union’s risk management processes focus on the major areas of market risk, credit risk and operational risk. Authority flows from
the Board of Directors to the Audit and Risk Committee which is integral to the management of risk. The following diagram gives an overview
of the risk management structure.
Board
Audit and Risk
Committee
Internal Audit
ALCO Committee
The main elements of the risk management governance
structure are:
Board
This is the primary governing body. It approves the level of risk
which the Credit Union is exposed to and the framework for
reporting and mitigating those risks.
Audit and Risk Committee
The Audit and Risk Committee is established to oversee the
financial and risk functions of the Credit Union to assist the Board of
Directors in the discharge of their responsibilities for:
Audit
• To establish an audit and prudential reporting regime that
complies with prudential requirements.
• To define the audit and prudential reporting policies for the
Credit Union.
• To ensure that high quality accounting and prudential
information is provided by Management to the Board and
APRA.
• To define the roles of Internal and External Auditors, and to
allocate functions to oversee and deliver suitable and correct
data.
• To assist the Board in providing an objective non-executive
review of the effectiveness of the Credit Union’s financial
reporting.
Risk
• To formulate the risk strategy of the Credit Union.
• To determine policies that ensure the risk strategy is adhered to.
• To review and oversee the Risk Management Framework.
• To review reports prepared by management in meeting its risk
management obligations.
Asset & Liability Committee (ALCO) – Credit Risk
This committee of senior management meets at least monthly and
has responsibility for managing and reporting credit risk exposure. It
scrutinises operational reports and monitors exposures against limits
determined by the Board. The ALCO also determines the credit risk
of loans in the banking book, ensures provisioning is accurate and
determine controls that need to be in put in place regarding the
authorisation of new loans.
The ALCO Committee has responsibility for implementing policies
to ensure that all large credit exposures are properly pre-approved,
measured and controlled. Details concerning a prospective borrower
are subject to a criteria-based decision-making process. Criteria
used for this assessment include: credit references, loan-to-value
ratio on security and borrower’s capacity to repay which vary
according to the value of the loan or facility.
All large credit exposure facilities above policy limits are approved
by the ALCO prior to submission to the Board. All exposures are
checked daily against approved limits, independently of each
business unit, and are reported to the ALCO Committee.
Intech Credit Union Ltd Annual Report 2013 35