Page 83 - EXIM-Bank_Annual-Report-2022

A VISION COMMITMENT EMPOWERING ENSURING ENHANCINg FINANCIAL
80 EXIM BANK MALAYSIA ANNUAL REPORT 2022 TO SERVE TO LEAD GROWTH SUSTAINABILITY gOVERNANCE STATEMENTS 81

STRESS TEST

To anticipate and respond swiftly to the new or emerging risks, the Bank perform stress tests as part of the risk management
process. The results are integrated into the decision making and regularly reviewed against actual performance versus the
risk estimation (back-testing).
The stress testing exercise must be comprehensive and include both on and off balance sheet exposures, commitments,
guarantees, and contingent liabilities as well as other risk drivers on credit, market, operational and Shariah risk. The exercise must
also commensurate with the nature, size and complexity of the Bank’s business operations and risk profile.

As stress test is a continuous process, RMD will continuously strive for improvement on the stress test exercise by exploring
potential areas for enhancements as well as establishing linkages between stress test to the risk appetite metrics moving forward.

The stress test methodology is guided by the Stress Test Policy document issued by the Bank Negara Malaysia (BNM). The Stress
Test Working Group (STWG) is established to conduct the stress test based on the approved methodologies and parameters.
Respective primary enterprise risks in the Bank are managed by the following key frameworks and approved policies:

Key Frameworks • Risk Management Framework
• Technology Risk Management Framework
• Cyber Resilience Framework

Key Policies • Risk Appetite Policy • Asset Liability Management and Market Risk Policy
• Credit Risk Policy • Liquidity Risk Management Policy
• Expected Credit Loss Policy • Risk Retention Policy
• Operational Risk Policy • Policy on Product Management
• Shariah Risk Management Policy • Fraud Management Policy

PRIMARY ENTERPRISE RISK CATEGORY DEFINITION & RISK MITIGATION

To enable robust and sustained growth, effective management of recognised major enterprise risk is critical.
Based on operating landscape in 2022, the Bank has identified the primary enterprise risk category & risk mitigation as follows:

Primary Enterprise
No Risk Definition

1. Credit Risk The risk due to uncertainty on the customer or the customer’s counterparty ability to
meet its obligations or failure to perform according to the terms and conditions of the
credit related contract.

2. Shariah Shariah non-compliance risk is the risk that arises from the Bank’s failure to comply
Non-Compliance with the rulings of the Shariah Advisory Council of Bank Negara Malaysia (SAC),
(SNC) Risk standards on Shariah matters issued by the Bank Negara Malaysia pursuant to section
29(1) of the IFSA and section 33E(1) of the DFIA, or decisions or advice of the Shariah
Committee for its Islamic finance activities.

3. Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal operational
or financial processes and systems, the actions of people or from external events.

4. Market Risk Market risk refers to the potential loss arising from adverse movements in the market prices.