The Group has prepared a comprehensive guideline document for the risk management policy/strategy: “Risk Strategy for 2019-2021” (2018-2020 version was in force previously). The document takes a 3-year perspective and is reviewed and updated annually. It is approved by the Bank’s Management Board and Supervisory Board. The risk strategy is inextricably linked to other strategic documents, such as: Budget, Liquidity Plan, and Capital Plan.
The Risk Strategy bases on the two concepts defined by the Group:
- Risk profile – current risk profile in amount or type of risk the Group is currently exposed. The Group should also have a forward looking view how their risk profile may change under both expected and stress economic scenarios in accordance with risk tolerance,
- Risk tolerance – the maximum amount or type of risk the Group is prepared to accept/tolerate to achieve its financial and strategic objective.
Goal of Risk Strategy is to define a risk profile and to maintain a risk profile for all risk types within the limits set in the risk tolerance.
Risk tolerance measures consider both the current and forecasted target risk profile. They have been defined in the key areas, listed below:
- Asset quality,
- Liquidity and funding,
- Earnings volatility,
- Business mix,
- Franchise and reputation.
The Group has a clear risk strategy, covering retail credit, corporate credit, markets activity and liquidity, operational and capital management. For each risk type and overall the Group clearly define the risk tolerance.
The Risk Tolerance of the Group is mainly defined through the principles and targets defined in Risk Strategy and complemented in more detail by the principles and qualitative guidelines defined in the following documents:
- Capital Management and Planning Framework
- Credit Principles and Guidelines
- Rules on Concentration Risk Management
- Principles and Rules of Liquidity Risk Management
- Principles and Guidelines on Market Risk Management on Financial Markets
- Principles and Guidelines for Market Risk Management in Banking Book
- Investment Policy
- Principles and Guidelines for Management of Operational Risk
- Stress tests policy.
Within risk tolerance, the Group has defined tolerance zones (build up based on the “traffic lights” principle). Tolerance zones depend on defined measures of risk tolerance levels. As for all tolerance zones have been set:
- Escalation process of taken decisions/actions (bodies/organizational entities responsible for decisions and actions)
- Catalogue of decisions/actions on risk controls and mitigation
- Risk tolerance monitoring procedures.
The Group pays particular attention to continuous improvement of the risk management process. One measurable effect of this is a success of the received authorization to the further use of the IRB approach in the process of calculating capital requirements.