Bank Respublika JSC performed a number of activities in the field of risk management in 2009. In particularly, a number of important risk management activities (loan risks, liquidity risks, currency risks, operational risks, environmental and social risks) were performed for the purposes of ensuring a steady progress of the Bank’s development during the time of the world financial crisis.
A brief review of risk management activities performed by Bank Respublika JSC in 2009 is provided below.
Loan risks – these risks have the highest specific weight in banking operations as loan portfolio forms a significant part of the bank assets. Joint operation of various structural divisions (branches (sale channels), Loan Department, Department of Law and Risk Management Department) of the Bank was provided for the purposes of mitigation of loan risks. Risk management operations were divided into two stages based on analyses before (counteragent risks analysis) and after (loan portfolio control) issue of the loan.
Apart from this, the Bank utilizes a system of limits for correct diversification of loan portfolio and constantly improves the risk management operations.
Liquidity risks – the Bank was timely performing its obligations both at the time of the global financial crisis and during periods of partial mitigation of the financial crisis sequences. Liquidity ratio has always been at a satisfactory level in 2009. The Bank exercises liquidity control by means of various indicators, ratios and limits and relies on the Emergency Plan for prevention of any unexpected liquidity risks.
Currency risks – the currency risks faced by our Bank are associated with our fields of operation and diversity of the customer base. For the purposes of minimization of currency risks, the OCP (open currency positions – difference between foreign currency demand and liabilities) limits have been assigned in accordance with the appropriate regulations of the National Bank of Azerbaijan. The Bank exercises daily control over compliance with these regulations.
Besides, the Bank widely applies the international experience in management of currency risks. In particular, such methods as exchange rate management, stop loss, counterpart, currency liquidity management and scenario method have been applied at Bank Respublika.
Operational risks – important activities performed in 2009 for the purposes of minimization of operational risks include completed setup of a new banking software, improvement of software users control methods, strengthening of anti-money laundry and anti-terrorism financing operations.
Environmental and social risks – The development of a new system aimed at management of environmental and social risks was started in 2009. In the future it is envisioned to apply the international banking experience in this field and arrange special trainings for the bank staff.
Management of the above-mentioned risks is performed in compliance with the respective guidelines of the National Bank of the Republic of Azerbaijan. Stress tests are performed for each risk category and the results are regularly discussed by the Risk Management Committee.