BREAK IN RISK MANAGEMENT FRAMEWORK AT FINANCIAL INSTITUTION

A local financial institution has recently reported a breach of its risk management framework to the Central Bank of Seychelles (CBS). According to sources, the breach occurred when the institution failed to adequately address a key risk in its operations.

Investigation and Response

The CBS was informed of the breach within 10 business days of the institution becoming aware of it. An investigation revealed that the risk management framework had not been properly updated to reflect changes in the market and regulatory environment. To remedy the situation, the financial institution has taken immediate steps to rectify the breach by conducting a thorough review of its risk management framework.

• Updating policies and procedures to ensure all risks are identified, assessed, and managed effectively
• Notifying the CBS of the breach and working closely with regulators to implement corrective measures

Strengthening Internal Audit Function

In addition to addressing the breach, the financial institution has also strengthened its internal audit function. The internal auditor now has unfettered access to all business lines and support functions, enabling them to conduct more effective evaluations of the institution’s risk management framework.

• Reviewing policies, processes, and controls put in place by management to ensure compliance with CBS prudential requirements
• Identifying and mitigating potential risks in a timely manner

Fit and Proper Policy

The financial institution has also reviewed its Fit and Proper Policy, which outlines the criteria for assessing the fitness and propriety of responsible persons. The policy requires that each responsible person be aware of and understand the provisions of the policy.

• Conducting training sessions for all staff members to ensure awareness and understanding of the policy
• Widely communicating the policy throughout the organization

Lessons Learned

The breach highlights the importance of:

• Regular reviews and updates of risk management frameworks to ensure they remain effective in identifying and mitigating potential risks
• Robust internal audit functions in place to identify and address weaknesses in operations

Conclusion

While the breach was a serious incident, the financial institution has taken swift action to rectify it and strengthen its risk management framework. The CBS’s guidance and oversight have been instrumental in ensuring that the institution is able to maintain a stable and sound financial position.