Annual REPORT

ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
NOTES TO THE FINANCIAL STATEMENTS (Continued)
4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
(c)
Market risks (continued)
The table below sets out the impact on future earnings of an incremental 10% parallel fall or rise in all foreign currencies
at the beginning of each quarter during the 12 months from 1 January 2015.
Assuming no management actions, a series of such rise and fall would impact the future earnings and capital as illustrated
in the table below;
Amount Scenario 1 Scenario 2
31 December 2015 10% appreciation 10% Depreciation
Sh’000 Sh’000 Sh’000
Profit Before Tax 2,957,128 3,252,841 2,661,415
Adjusted Core Capital 11,327,120 12,459,832 10,194,408
Adjusted Total Capital 13,882,236 15,270,459 12,494,012
Risk Weighted Assets (RWA) 73,765,213 73,765,213 73,765,213
Adjusted Core Capital to RWA 15.4% 17% 14%
Adjusted total Capital to RWA 18.8% 21% 17%
Assuming no management actions, a series of such appreciation would increase earnings by
Sh 29,848,418 (2014 - Sh 11,144,389), while a series of such falls would decrease net interest income by Sh 29,848,418
(2014 - Sh 11,144,389).
(d)
Other risks
i) Strategic risk
Strategic risk is the potential for loss arising from ineffective business strategies, improper implementation of strategies,
sudden unexpected changes in the Group’s environment, or from lack of adequate responsiveness to changes
in the business environment.
The Group faces several strategic risks from its environment which include:
· Macro-economic changes.
· Competition from the financial industry and organisations providing similar services.
· Technological changes.
· Key legislative and regulatory changes.
· Major political events.
· Human capital or social/demographic trends and changes.
Who manages strategic risk?
The Board of Directors is responsible for the overall generation and implementation of the Bank’s strategy for
purposes of enhancing shareholders’ value. It has however delegated the implementation aspects to the Managing
Director and the Senior Management team who execute strategy.
The bank has a strategy office reporting directly to the Managing Director with a mandate of co-ordinating strategy
development, monitoring implementation of the strategic objectives and performing evaluation and control.
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