Notes to and forming part of the Unconsolidated Financial Statements
For the year ended December 31, 2018
47. RISK MANAGEMENT
This section presents information about the Bank’s exposure to and its management and control of risks, in particular, the
primary risks associated with its use of financial instruments such as credit, market, liquidity, and operational risks.
The Bank has an integrated risk management structure in place covering domestic and International franchise.The Board
Risk and Compliance Committee (BRCC) oversees the entire risk management process of the Bank. Furthermore, Risk
Management Committee has been formed which looks at all risks collectively at senior management level. The committee
is chaired by the President and comprises of Heads of all Risk areas, Finance, Business etc. The Risk and Credit Policy
Group is responsible for the development and implementation of all risk policies as approved by the BRCC / BoD. The
group is organized into the functions of Market & Treasury Risk, Financial Institution Risk, Credit Policy & Research,
Consumer Credit Policy, Credit Risk Management and Operational Risk & Basel. Each risk function is headed by a senior
manager who reports directly to the Group Executive, Risk and Credit Policy. The role of the Risk and Credit Policy Group
includes:
- Determining guidelines relating to the Bank’s risk appetite.
- Recommending risk management policies in accordance with the Prudential Regulations, Basel II / III framework,
Regulatory framework of foreign countries where the bank operates and international best practices.
- Reviewing policies / manuals and ensuring that these are in accordance with BRCC / BoD approved risk management
policies.
- Developing systems and resources to review the key risk exposures of the Bank.
- Approving credits and granting approval authority to qualified and experienced individuals.
- Reviewing the adequacy of credit training across the Bank.
- Organizing portfolio reviews focusing on quality assessment, risk profiles, industry concentrations etc.
- Setting systems to identify significant portfolio indicators, problem credits and level of provisioning required.
- Establish an extensive Information Security (IS) Program and governance structure to manage the Security of the
Information assets.
47.1 Credit risk
Credit risk is the risk that a customer or counterparty may not settle an obligation for full value, either when due or at any
time thereafter. This risk arises from the potential that a customer's or counterparty’s willingness or ability to meet such an
obligation is impaired, resulting in an economic loss to the Bank.
The credit risk management process is driven by the Bank's Risk Management Policy, Credit Policy for Corporate,
Commercial, SME & Agri, Collateral Management Policy, Credit Policy International, Credit Policy UAE and Credit Manual,
which provides policies and procedures in relation to credit initiation, approval, documentation and disbursement, credit
maintenance and remedial management.
Individual credit authorities are delegated to credit officers by the Group Executive - Risk & Credit Policy (authorized by
BoD), according to their seasoning / maturity. Approvals for Consumer loans are centralized, while approval authorities
for International, Corporate, Commercial, SME and Agri exposures are delegated at a Country / Regional level.
Furthermore, credit authorities are also delegated to business teams in various regions for Commercial, SME & Agri
lending. All credit policy functions domestic & international are centrally organized.
Concentrations of credit risk exist if clients are engaged in similar activities, or are located in the same geographical
region, or have comparable economic characteristics such that their ability to meet contractual obligations would be
similarly affected by changes in economic, political or other conditions. The Bank manages, limits and controls
concentrations of credit risk to individual counterparties and groups, and to industries, where appropriate. Limits are also
applied to portfolios or sectors where the Bank considers it appropriate to restrict credit risk concentrations, or to areas of
higher risk, or to control the rate of portfolio growth.
132 United Bank Limited
