Financial Crime World

Financial Market Infrastructure Enterprise Risk Management Framework

Abbreviations

  • BIS: Bank for International Settlements
  • BSP: Bangko Sentral ng Pilipinas
  • CMIC: Capital Markets Integrity Corporation
  • COSO: Committee of Sponsoring Organizations
  • ERM: Enterprise Risk Management

Enterprise Risk Management Framework

The financial market infrastructure’s enterprise risk management framework is a comprehensive approach to managing risks that can impact the organization’s ability to achieve its strategic objectives. The framework recognizes the importance of integrating risk management with strategy-setting and performance.

Risks Defined

The following are some of the key risks identified:

  • Environmental Risk:
    • Climate change
    • Natural resources, pollution, and waste
    • Environmental opportunities
  • ESG Risks:
    • Environmental, social, and governance-related risks and/or opportunities that may impact the organization
  • Financial Market Infrastructure Risk:
    • The risk that the financial market infrastructure may not be able to operate effectively due to various factors such as technology failures, cyber attacks, or natural disasters
  • Fraud Risk:
    • The risk of exposure to any intentional act or omission designed to deceive, resulting in the suffering of a loss and/or the perpetrator achieving a gain
  • Funding Liquidity Risk:
    • The risk that a counterparty may not have sufficient funds to meet its financial obligations as and when expected
  • General Business Risk:
    • A decline in revenues or an increase in expenses that results in a loss that must be charged against capital

Enterprise Risk Management Principles

The enterprise risk management framework is based on the following principles:

  1. Recognizing Culture: Recognizing the importance of risk management in creating, preserving, and realizing value.
  2. Developing Capabilities: Developing the capabilities necessary to manage risk effectively.
  3. Applying Practices: Applying practices that are consistent with the organization’s risk management objectives.
  4. Integrating with Strategy Setting and Performance: Integrating risk management with strategy-setting and performance.

Conclusion

The financial market infrastructure’s enterprise risk management framework is designed to identify, assess, and mitigate risks that can impact the organization’s ability to achieve its strategic objectives. The framework recognizes the importance of integrating risk management with strategy-setting and performance and provides a comprehensive approach to managing risks.