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Bank Risk Governance Structure Ensures Day-to-Day Compliance

National Commercial Bank of Africa (NCBA) has established a robust Risk Governance Structure to ensure effective risk management practices and compliance with regulatory requirements.

The Three Lines of Defense

The bank’s risk governance structure consists of three lines of defense:

First Line of Defense

  • Responsible for identifying, assessing, controlling, and mitigating risks on a day-to-day basis.
  • Includes the Risk Management function that facilitates and monitors the implementation of effective risk management practices.

Second Line of Defense

  • Includes key functions such as:
    • Independent identification and monitoring of risks.
    • Establishment and enforcement of an overall Bank Risk Governance Framework.
    • Regular reporting to senior management and the Board of Directors.

Third Line of Defense

  • Responsible for conducting independent reviews and audits to ensure that the bank’s risk governance framework is effective and compliant with regulatory requirements.
  • Includes reviewing risk reports, conducting audits, and providing recommendations for improvement.

Risk Reporting Structure

NCBA has established an Enterprise Risk Management (ERM) function that reports directly to the Board of Directors through the Board Risk Management Committee (BRMC). The ERM function provides regular updates on the bank’s risk profile to senior management and the Board of Directors.

Stress Testing

The bank conducts regular stress testing to assess its potential vulnerability to exceptional but plausible events. This includes:

  • Defining potential extreme adverse future economic scenarios.
  • Evaluating the impact on the bank’s credit risk portfolios, operational risk exposures, market risk exposures, and liquidity.

Risk Treatment Strategies

NCBA applies various risk management strategies to align identified risks with the objectives and strategies of the organization. These strategies include:

  • Risk Reduction: reducing the likelihood or impact of a risk.
  • Risk Transfer: transferring the risk to another party.
  • Risk Acceptance: accepting the risk and not taking any action to mitigate it.
  • Risk Avoidance: avoiding the risk by not engaging in the activity that creates it.

The bank’s risk governance structure ensures that it is well-positioned to identify, assess, control, and mitigate risks on a day-to-day basis, thereby ensuring compliance with regulatory requirements and protecting its customers’ interests.