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Main principles of risk management

Banking is concerned with the necessity of making several kinds of risks. Risk management is an integral part of the credit institution’s control system. The risk management process includes a sequence of operations to indentify risks, their quantitative evaluation, analisys, control and formation of a feedback (reporting) system.

To control the level of risk, taken by the bank, some relevant risk indicators are used, ie quantity indexes for the current asessment of risks taken, their admissibility in terms of financial and regulatory constraits. The risk management system enables to preside a preventive control for administrative decisions made, exclude or minimize economic or reputational disbenefit and identify any additional human and material resources to ensure the liquidity of the bank. Special attention is focused on three main types of risks: credit, market and operational risk. Each of them consists of several sub-categories, those are: concentration risk, risk of revaluation of assets, county exposure, liquidity risk, economic cycle risk and other risks that are dependent on the size of a credit institution, its strategy and range of banking activity.

The basic parameters and principles of credit risk management are documented in the Credit Policy of the Bank. Operational risk is managed by the operational risk management Policy. Monitoring for regulatory compliance with liquidity and recovery measures in times of economic crises are documented in the bank`s liquidity management Strategy.

The challenge of directorship is to maintain liquidity, profitability and sustainability of the bank in a changing economic situation, neither in domestic nor foreign financial markets.

 

For further details: Tallinna Äripanga AS 2015.a. konsolideeritud majandusaasta aruanne. (p.43)

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