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Banks must have decisions in advance on the Risk Appetite Framework, including the total risk possibility and type of risks. They must also have strategies and business plans to manage these risks successfully. When generating profits, the following risk factors must be considered: Liquidity Risk, Credit Risk, Operational Risk and Market Risk, Legal, Regulatory and Reputational Risk, Group & Related Parties Risk and Strategic Risk. Myanmar Tourism Bank have been implemented as per CBM gaudiness on risk management November 20, 2020.
The Risk Management Department is responsible for managing AML/CFT and prudential risks. To achieve this, the department adheres to the Central Bank of Myanmar’s Guidelines on Bank Risk Management Practices issued on November 20, 2020, as well as Directive 18/2019. Additionally, the Risk Management Department has developed and implemented a comprehensive risk management framework, including policies for risk management, operational risk, and fraud risk, as well as key risk indicators (KRIs) and business continuity plans (BCPs). The department conducts risk assessments for new banking services to proactively mitigate potential losses and improve the overall risk profile of the bank. A budget has been allocated and is being implemented to combat money laundering and the financing of terrorism.
The Risk Management Department of Myanma Tourism Bank Limited is adhering to all applicable laws, directives, and notices in order to mitigate the risks associated with money laundering and terrorist financing.
Liquidity Risk means losses that occur not only when the expected currency flows do not materialize, but also when the currency flows do not reach their targets. All banks must classify and identify market risks, and must record the processes of checking, monitoring, controlling, and identification under written policies, rules, and regulations. Senior executives must then execute these policies after they have been approved by the Board of Directors.
All banks must classify and identify their businesses, including loans, trading funds, finance, foreign exchange and currency trading, investments, and other rights and resources related to significant credit risks of the businesses that are not included in their balance sheets. All policies, rules, and regulations must be documented in writing for the classification and identification of loan types and credit risks. The processes of checking, measuring, monitoring, controlling, identification, and reservation must also be recorded under these written policies, rules, and regulations.
Operational Risk refers to the losses resulting from complex operations, internal control failures, process and information system issues, organizational changes, fraud, human error, terrorist attacks, natural disasters, and unforeseen catastrophes.
Market Risk refers to the potential losses a bank may incur due to fluctuations in market prices, particularly interest rates, foreign exchange rates, share prices, other bond prices, and the prices of unstable commodities. All banks must identify and assess market risks, and the processes of checking, monitoring, controlling, and classifying these risks must be documented in written policies, rules, and regulations. Senior management must then execute these policies after they have been approved by the Board of Directors.
Legal and Regulatory risk refers to the adverse impact of existing or new rules or statutes. The losses due to non-compliance of legal and regulatory directions are considered as potential and not actual due to a variety of possible regulatory actions.
Legal and regulatory actions initiated against a financial institution affect its reputation which may cause business loss to the bank. We should be very careful about any adverse news in the market and take immediate corrective steps. Bank’s service-related issues also affect bank’s reputation. So we should have a strong client feedback and complaint redressal system in place.
Reputational Risk is important in the banking business because banking activity is highly dependent on trust and a good and clean reputation amongst different stakeholders. We can effectively manage reputational risk by building up a good corporate and social reputation in the eyes of our stakeholders by maintaining high standards of customer service and continuous communication with them.
The major factors affecting the bank’s reputational risk are as under:
Group & Related Parties Risk means possible damage because a bank is a member of a Group of Companies and doing business with related owners of this Group of Companies or having any business connections. We must follow the regulatory directions and avoid any related party business transactions.
Financial institutions also carry strategic risk which comes with the growing challenges in the market and adverse economic environment. We should be watchful of such challenges and take necessary corrective measures on a timely basis.
