Description of significant types of risk in the ESG area
[GRI 102-15] The Bank has described significant risks related to its activity that may exert an unfavourable impact on social, employee, natural environmental issues and respecting human rights and combating corruption. In the social area, Bank Millennium manages various types of risk; however, the overriding risk for the Bank is the risk related to the safety of its clients’ funds. It is a function of other types of risk, including, among others, the reputation risk considered from the point of view of the Bank and the Bank Millennium S.A. Group, as well as from the point of view of the entire banking sector. Additionally, the Bank distinguishes risk resulting from its cooperation with clients (including credit risk) and contractors.
With regard to the risk related to client relations, the Bank examines the legal aspects of the agreements it has signed, the risk of incorrectly designing products and services and the risk of making the optimum selection of products to suit clients’ needs and possibilities. At the same time, the Bank analyzes new legal regulations, the opinions pronounced by UOKiK (Office of Competition and Consumer Protection) and other authorities and is focused on delivering the best quality products and services to its clients, as the Bank’s high ratings in various rankings amply attest.
In terms of the risk related to incorrect employment and work safety practices, the Bank minimizes the risk of high employee turnover by embracing the pertinent policies (HR, compensation and diversity, among others) and offering high working standards.
The risk related to the issue of failing to respect human rights and combat corruption refers to the possibility of instances of human rights violations and corruption occurring in the organization. This causes risk of legal, administrative, financial liability and loss of reputation. The Bank’s Group prevents this risk by observing the provisions of the “Diversity Policy” and obligating its employees and business partners to adhere to the Bank Millennium Group’s Code of Ethics in which these issues are regulated and by offering the ability to report violations anonymously in these areas.
The risk of impact on the natural environment is associated mainly with the negative impact of the Group on the environment, both through its own operating activity and through projects and investments financed by the Bank. The Group prevents this risk by submitting to legal regulations, monitoring its own environmental impact and implementing environmentally-friendly actions and observing the “Environmental Policy of the Bank Millennium Group” and project financing rules.
Another critical risk, to which the Bank is exposed, is the risk of financial loss associated with a failure of the customers to repay liabilities. If the volume of lost loans becomes high, the Bank could suffer financial losses. In the same case, the consequence and the risk at the customer’s side may be the loss of credit capacity (unfavourable entries in registers such as BIK), loss of financial balance of a household and the Bank launching a court procedure aimed at enforcing repayment.
A detailed description of the management of the foregoing types of risk has been set forth in the various sections of the report pertaining to relations with clients, employees, business partners and communities and to respecting human rights, preventing corruption and managing the natural environmental impact.