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Part - IV

2. Quallitative measures and risk reporting

Qualitative measures ensure that all risk types are properly identified and may not take account of risk quantification. The bank should place a formalized risk-reporting framework and should have appropriate escalation procedures between risk takers to risk managers. Qualitative measures cover the issues relevant to identifying quality of customer, compliance risks, operational risks, money laundering, control and assurance profiles.

The consolidated risk reporting are classified as follows: -

• Reporting by Head of Risk Management Department * to CEO and Risk Committee.

• Reporting by risk managers to Head of Risk Management Department.

• Reporting by business units and support function to Risk Management Department.

3. Quantitative measures

Bank should design performance measures that align the objectives of business unit managers and executives with respect to mission and vision of Bank and the shareholders are central to the value creation process. In order to ensure that value creation remains the ultimate objective of a business unit, target performance measures (Risk adjusted performance management or RAROC ** approach) should be set. Quantification of bank’s risks includes the maximum acceptable loss in terms of credit, market risk and operational risk.

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* Chief Risk Officer.
** RAROC = (revenues - expenses-expected loss)/(economic capital).