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Myanmar’s Banks Tighten Grip on Risk Management as Financial Stability Becomes Top Priority
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In a bid to ensure the stability and sustainability of Myanmar’s financial sector, banks operating in the country are prioritizing risk management as never before. A Bank, one of the leading financial institutions in Myanmar, has implemented a robust risk management framework that covers all aspects of financial and non-financial risks.
Risk Governance Framework Key to Bank’s Success
A Bank’s risk governance framework is an essential component in effectively managing enterprise-wide risks. The framework is designed to establish and reinforce the bank’s risk culture, articulate and monitor adherence to the risk appetite, and establish a risk management system with three lines of defense.
The framework comprises three lines of defense:
- Frontline units
- Independent review and monitoring teams
- Internal audit, which provides independent assurance
Comprehensive Risk Strategy
A Bank has implemented a comprehensive risk strategy that covers all risk categories applicable to its business operations, including:
- Credit risk
- Interest rate risk
- Liquidity risk
- Price risk
- Operational risk
- Compliance risk
- Strategic risk
- Reputation risk
The Risk Management Framework is aligned with both domestic and international Basel Accord standards.
Specialized Risk Management Systems in Place
A Bank’s risk management system comprises its policies, processes, personnel, and control systems, which are designed to minimize the bank’s exposure to various types of risks. The system involves three lines of defense:
- Frontline units
- Independent review and monitoring teams
- Internal audit
Credit Risk Management System
A Bank has established a credit risk management system that closely monitors customers’ exposure and reviews collateral and creditworthiness.
Market Risk Management System
Market risk is managed through close monitoring of business dealings with market price and evaluating Value-at-Risk (VAR) by holding ALCO Committee meetings.
Liquidity Risk Management System
Liquidity risk is also carefully managed, with the bank ensuring that liquidity ratios do not fall below 20%. The Assets & Liability Management Committee (ALCO) and Operation Team collaborate to ensure no mismatch in funding sources and uses.
Operational Risk Management System
Operational risk management includes cybersecurity risks, internal fraud, external fraud, business disruption, and system failures. Risk Management Committee and Legal & Compliance Department closely coordinate with relevant departments to reduce operational risks.
Compliance Functions
Compliance functions are put in place as part of the ML/FT risk management framework, ensuring that the bank complies with guidelines, responsibilities, restrictions, procedures, and policies arising from rules, regulations, and manuals.
Commitment to Risk Management Key to Financial Stability
In a statement to the press, A Bank’s management team emphasized the importance of risk management in ensuring the stability and sustainability of the bank. “Risk management is crucial for our business operations, and we are committed to implementing robust systems and processes that minimize our exposure to various types of risks,” they said.
As Myanmar’s financial sector continues to grow and evolve, banks like A Bank will play a critical role in ensuring the country’s financial stability. By prioritizing risk management and implementing comprehensive risk governance frameworks, these institutions can help mitigate potential risks and ensure the continued growth and prosperity of the economy.