Risk management governance framework
ROLES AND RESPONSIBILITIES
Board of Directors
- Approve and periodically review risk strategy and policies;
- Approve the Group’s risk appetite annually and monitor the Bank’s risk profile against this appetite;
- Ensure executive management takes steps necessary to monitor and control risks;
- Ensure that management maintains an appropriate system of internal control and reviews its effectiveness;
- Ensure risk strategy reflects the Group’s tolerance for risk;
- Ensure that the Group’s overall credit risk exposure is maintained at prudent levels and consistent with the available capital;
- Review and approve changes/amendments to the risk management framework;
- Review and approve risk management procedures and control for new products and activities;
- Periodically receive risk reports from the management highlighting key risk areas, control failures and remedial action steps taken by the management. This is done at least once every quarter;
- Ensure that the management as well as individuals responsible for credit risk management possess the requisite expertise and knowledge to accomplish the risk management function;
- Ensure that the Group implements a sound methodology that facilitates the identification, measurement, monitoring and control of risk;
- Ensure that detailed policies and procedures for risk exposure creation, management and recovery are in place; and
- Appoint credit officers and delegate approval authorities to individuals and committees.
Board Committees
The above responsibilities of the Board of Directors are discharged primarily by two committees of the Board, namely:
- Board Audit and Risk Assessment Committee; and
- Board Credit Committee.
Without prejudice to the roles of these committees, the full Board retains ultimate responsibility for risk management.
Board Audit and Risk Assessment Committee
The primary role of the Committee is to report to the Board and provide appropriate recommendations on matters relevant to risk management and internal audit. The Committee is made up of two Executive and three Non-Executive Directors, with a Non-Executive Director as Chairman. The Chief Risk Officer (CRO) reports to this Committee and is a non-voting member.
Board Credit Committee
The Board Credit Committee ensures effective management of credit risk by the Bank and its subsidiaries. It is also responsible for approving the following:
- Credit risk management strategy, policies and standards;
- Credit products, processes and approving authorities;
- Credit risk appetite and limits; and
- Credit requests above MCC level, including those going to the full Board as a recommendation. This Committee is made up of the Group Managing Director/Chief Executive, all the Executive Directors and five Non-Executive Directors. The Chairman is a Non-Executive Director.
Management Committee (MANCO)
For all categories of risk, the Management Committee is responsible for formulating policies, monitoring implementation and reviewing risk reports for presentation to the Board/Board committees as well as implementing Board decisions across the Bank.
To be more specific, the management of the Bank and its subsidiaries is responsible for the following:
- Implementation of risk strategy approved by the Board of Directors;
- Developing policies and procedures for identifying, measuring and controlling risk;
- Providing appropriate resources to evaluate and control risk;
- Reviewing risk reports on a regular and timely basis; and
- Providing all reports required by the Board and its committees for the effective performance of risk management oversight functions.
Management Credit Committee (MCC)
It is the responsibility of this Committee to:
- Establish and maintain an effective risk management environment in the Group;
- Review proposals in respect of credit policies and standards and endorse them to the Board of Directors for approval;
- Define the Group’s risk and return preferences and target risk portfolio;
- Monitor on an ongoing basis the Group’s risk quality and performance, review periodic credit portfolio reports and assess portfolio performance;
- Define credit approval framework and assign credit approval limits in line with the Bank’s policy;
- Review defined credit product programmes on recommendation of the Head, Credit Risk Management (CRM) and endorse to the Board of Directors for approval;
- Review credit policy changes initiated by the management of the Bank and endorse to the Board of Directors for approval;
- Ensure compliance with the Bank’s credit policies and statutory requirements prescribed by the regulatory/supervisory authorities;
- Approve credit facility requests within limits defined by FirstBank’s credit policy, and within the statutory requirements set by the regulatory/supervisory authorities;
- Review and recommend to the Board Credit Committee facilities beyond management approval limits;
- Review monthly credit portfolio reports and assess portfolio performance;
- Request rapid portfolio reviews or sector/industry reviews from CRM where deemed appropriate; and
- Approve exceptions/write-offs, waivers and discounts on non-performing credit facilities within specified limits.