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72 EXIM BANK MALAYSIA
Annual Report 2020

STATEMENT OF RISK MANAGEMENT

STRESS TEST
In order to anticipate and respond swiftly to new or emerging risks, the Bank performs periodic stress tests as part of the risk
management process.
Top-down and bottom-up approaches, where appropriate, are adopted by the Bank in its stress testing exercise depending on the
purpose of the stress test. The stress testing exercise must commensurate with the nature, size and complexity of the Bank’s
business operations and risk profile. It must be comprehensive in its scope and coverage and includes on-and off-balance sheet
exposures, commitments, guarantees and contingent liabilities.

This is in line with Bank Negara Malaysia’s (BNM’s) Stress Test Guidelines, which requires simulating events that could potentially
impact the Bank’s capital position with main emphasis on credit, liquidity, market and operational risks.

For governance, the respective primary enterprise risks in the Bank produced the following key frameworks and policies:

• Risk Management Framework • Credit Risk Policy
• Risk Appetite Framework • Expected Credit Loss Policy
Risk • Compliance Framework Risk • Operational Risk Policy
Frameworks • Technology Risk Management Policies • Shariah Risk Management Policy
• Asset Liability and Market Risk
Framework Policy
• Cyber Resilience Framework • Liquidity Risk Management Policy

RISK MITIGATION

Effective management of risk is crucial to enable the Bank’s strong and sustained growth.

Based on the operating landscape in 2020, the Bank has identified key primary risks and risk mitigation as follows:

No. Key Primary Risks Definition Mitigation Measures
1. Credit Risk The risk due to uncertainty on • Perform independent credit evaluation and periodic
the customer or the customer’s review of the Portfolio Risk Rating (PRR), Target
counterparty ability to meet its Market and Risk Acceptance Criteria (TMRAC), product
obligations or failure to perform programmes, Underwriting Standards and all other
according to the terms and matters pertaining to credit risks.
conditions of the credit related • Proactive account management, through identification
contract. of the Significant Increase in Credit Risk (SICR) events,
for timely account classification and re-classification
with appropriate expected credit loss provisioning and
effective credit risk mitigation.
• Maintain comprehensive credit policy and limits within
the Board-approved Risk Appetite.
• All exposures and non-compliances, including
emerging risk, are investigated and escalated to the
Management & Board Committees with action plan
and monitoring status.