Philippine Banking Sector’s Risk Management Strategy Gets Boost from Land Bank of the Philippines
The Land Bank of the Philippines (LANDBANK) has reaffirmed its commitment to effective risk management in its business operations, with a robust framework that aligns its strategic objectives with its risk appetite.
Risk Management as an Integral Component of Good Governance
According to LANDBANK officials, risk management is overseen by the board of directors, the Risk Oversight Committee (RISKCOM), and senior management. The bank’s core philosophy is to strike a balance between risk and reward, maximizing business opportunities while operating within its risk threshold and minimizing losses beyond its appetite.
Enterprise-Wide Risk Management System
LANDBANK’s risk management approach is anchored on its enterprise-wide risk management (ERM) system, which ensures that all business processes are aligned with the bank’s mission, vision, and strategic objectives. The ERM system operates at three levels:
- Strategic Level: LANDBANK’s board of directors and senior management oversee enterprise-wide risk management.
- Portfolio Level: Groups and departments monitor possible breaches and recommend policies and processes to address risk occurrences.
- Transactional Level: Authorized risk takers implement risk policies and procedures, with immediate escalation of policy breaches or procedural infractions to department or group heads.
Risk Governance Framework
LANDBANK’s risk governance framework involves an oversight function covering:
- Risk identification
- Assessment
- Measurement
- Control
- Monitoring
- Reporting of risks inherent in all activities of the bank
The risk management group (RMG), an independent unit, performs this oversight function for all major risk areas, including:
• Credit risk • Market risk • Operational risk • Compliance risk • Interest rate risk • Counterparty credit risk • Liquidity risk • Reputation risk • Strategic risk • Subsidiaries risk • Trust operations risk • Information technology risk • Related party transactions risk
Synergy between Audit, Compliance, and Risk Management Functions
The synergy between LANDBANK’s audit, compliance, and risk management functions provides credence to the bank’s corporate governance in implementing an effective risk management framework. With this robust approach, LANDBANK is well-positioned to navigate the complex risks in the Philippine banking sector and achieve its strategic objectives while maintaining a strong reputation for stability and reliability.