Page 40 - Bank Muamalat_AR24

38 BANK MUAMALAT MALAYSIA BERHAD

PRINCIPAL RISKS AND UNCERTAINTIES

Risk identification, analysis and mitigation are continuously practised as key components in building and executing the Bank’s
sustainable business strategy. Analysis and response is enhanced by understanding the issues that are material to the business and
to our stakeholders. Below is an outline of the principal risks within the Bank’s operating environment and the ways in which they
impact Bank Muamalat and how they are managed or mitigated.

Type of Risk Description and impact How we manage or mitigate the risk
The risk of financial loss if a customer or • Enhance key risk indicators to monitor emerging credit risk and
counterparty unable/unwilling to meet its provide early warning signals
Credit Risk obligations. It is the primary source • Ongoing review, enhancements and monitoring of risk appetite
of risk to the Bank • Enhance and tighten risk acceptance criteria
This risk may impact the Bank’s • Ongoing monitoring on collaterals, guarantees and risk limits
profitability, asset quality, liquidity and • Conduct periodic stress testing and scenario analysis to assess
reputation customer
• Diversify into new market segments
• Streamline and enhance credit risk policies
• Validate credit risk models
Link to Material Matter Link to Impact on Capitals

The risk of losses in on- and off-balance • Develop hedging strategies against adverse price movements
sheet positions resulting from movements • Enhance monitoring in market risk limits
Market Risk in market rates, foreign exchange rates, • Enhance monitoring of key risk indicators to better track risk
equity and commodity prices, which may exposures and provide early warning signals
adversely impact earnings and capital • Ongoing review, enhancements and monitoring of risk appetite
positions
• Diversification in pricing strategy
The risk may present an impact on the • Conduct periodic stress testing and scenario analysis
Bank’s profitability, liquidity and capital • Streamline and enhance Market risk policies

Link to Material Matter Link to Impact on Capitals

The risk of variability of assets and • Develop hedging strategies against adverse price movements
liabilities arising from volatility of market • Enhance monitoring in market risk limits
Rate of benchmark rates, impacting portfolios • Enhance monitoring of key risk indicators to better track risk
Return Risk both in the trading and banking books. exposures and provide early warning signals
Such changes may adversely affect both • Ongoing review, enhancements and monitoring of risk appetite
earnings and economic value
• Diversification in pricing strategy
The Bank’s capital, liquidity and • Conduct periodic stress testing and scenario analysis
profitability may be impacted by the risk • Enhance risk strategies and monitoring in Asset and Liabilities
Management
• Streamline and enhance Rate of Return Risk policies

Link to Material Matter Link to Impact on Capitals

M1 Economic M2 Entrepreneur M3 Carbon M4 Water M5 Waste M6 Employment M7 Diversity and Equal
Performance Development Management Management Management Opportunity

Training and Community Financial Customer Responsible Procurement Ethics &
M8 M9 M10 M11 M12 M13 M14
Education Development Inclusion Experience Financing Practices Integrity