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Compliance Risk Assessment Frameworks in Sri Lanka

Introduction

In an effort to strengthen its risk management practices and ensure compliance with regulatory requirements, Commercial Bank of Ceylon PLC has implemented a comprehensive Compliance Risk Assessment Framework. This framework is designed to identify and mitigate potential risks associated with non-compliance with laws, regulations, and internal policies.

Risk Governance Structure

The bank’s Board of Directors exercises oversight and provides guidance to an experienced Senior Management team, who works closely with their teams in managing risk. The bank has a rich risk culture that flows through all levels of the organization, with a strong emphasis on accountability and transparency.

Key Components

  • Risk Appetite Framework: To better understand and manage risks, the bank has implemented a comprehensive Risk Appetite Framework (RAF). The RAF helps to identify and quantify the bank’s risk tolerance in various areas, including:
    • Credit risk
    • Market risk
    • Operational risk
    • IT risk
  • Risk Culture: The bank has an established risk culture that focuses on enabling risk-assuming functions (i.e., business units) to make objective decisions in a consistent manner across the organization.
  • Stress Testing: An integral part of ICAAP under Pillar 2, stress testing is used to evaluate the sensitivity of the current and forward risk profile relative to risk appetite.
  • Compliance Risk Assessment: The bank conducts regular Compliance Risk Assessments (CRAs) to identify potential compliance risks associated with its operations.

Conclusion

Commercial Bank of Ceylon PLC has implemented a comprehensive Compliance Risk Assessment Framework that helps to identify and mitigate potential risks associated with non-compliance with laws, regulations, and internal policies. The bank’s risk governance structure, risk appetite framework, risk culture, stress testing, and compliance risk assessment processes all contribute to its strong commitment to ensuring compliance and managing risk.

References

  • Commercial Bank of Ceylon PLC. (2022). Compliance Risk Assessment Framework.
  • Central Bank of Sri Lanka. (2020). Guidelines for Stress Testing by Licensed Commercial Banks in Sri Lanka.
  • Basel Committee on Banking Supervision. (2017). Guidelines for Computing Capital for Incremental Risk in the Trading Book.