Page 42 - Banking Finance August 2024

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associated with money market operation of the bank which Formation of Audit and Compliance committee:
dealt with interest rate risk, currency risk and price risk. To Compliance and Audit function in bank is very crucial and
mitigate the market risk in proper way the bank fixes the important for the risk mitigation as this is the department
cap for capital market exposures, interbank borrowings and which oversees all the functioning of bank and monitor on
fixing prudential limit for every sector. Apart from this bank daily basis. If any irregularities found, the department
is also using risk mitigation instrument of the market. caution the concerned people and take the corrective action
on real time basis. Compliance consists of both internal
Conservation of capital for mitigation of Liquidity risk: compliance as well as regulatory compliance. This
Capital is required for every business and there is no department oversees all the requirement of regulatory
exception for banking business too. Capital is very crucial to compliances and saves the bank from any abnormal shock.
absorb any unpredicted and undesired shock in the banking Apart from this the audit committee provides direction to
business. To mitigate the liquidity risk, the bank conserves the audit function and monitor the quality of internal and
the capital and follow the BASEL rules (BASEL-I, BASEL-II and statutory audit. They ensure fairness, sufficiency, and
BASEL-III) of capital requirement and capital conservation. credibility of financial statements too.
Apart from this the bank is also maintaining the LCR and
NSFR for better and strong mitigation of liquidity risk.
Conclusion:
With the above discussion, we find that the risk is an integral
Formation of information technology strategy committee:
To mitigate the risk related to information technology the part in banking which always go hand in hand in banking
bank approves the IT policy to ensure that the IT strategy is business. To mitigate the risk to the best possible ways every
aligned with business strategy. The information technology bank comes up with a robust risk management policy and
strategies committee regularly reviews the IT risks, and forms a risk management committee which oversees all the
ensure the proper balance of IT investments for sustaining risk related regulatory as well as general compliances. The
the bank's growth. It also oversees the activity of Digital functions of risk management committee also include
Council, review technology from a future readiness setting limit for industry and country exposures, Review the
perspective, and oversees key projects progress and critical bank enterprise risk management framework, Risk appetite
IT system performance and review of special IT initiatives. frame work, Stress testing framework, Internal Capital
adequacy assessment process and framework for capital
Making Cyber Security Governance: Cyber risks allocation, Review the implementation of BASEL
management is an integral part of Bank's risk management implementation, Preparing the risk dashboard covering
framework for which every bank is committed to work various risks, keeping eye watch on outsourcing activities
towards aligning itself with everchanging threat landscape. and the activities of the Assets Liabilities management
The Bank makes an information and cybersecurity committee.
governance framework consisting of leadership,
organizational structures and processes that help them in With increasing use of technology in banking to boost the
mitigation of growing cyber security threat. digitization and automation processes for the customers,
bank is always facing the threat of cyber attacks and due to
Participation in external cyberattack simulations: Now a this ensuring effective management and governance of data
days with increasing use of technology in banking the fear has become a critical work for the bank for cyber risk
of cyberattack is mounting and becoming the risk factor for mitigation. Bank adopts various strategies to combat the
the bank. To mitigate this risk every bank conducts several risk sometimes bank accept and retain the risk whereas
cybersecurity attack simulation drills such as spear phishing sometimes they share the risk by diversifying or transferring
drills on employees, DDoS (Distributed Denial of service) for the risk to other by paying premium. The profitability of a
internal service providers, Social engineering- based attacks bank depends on risk mitigation as it reduces the
on staff of data center to gain physical access etc. and by requirement of provisions for bank. Thus, we can say that
this way bank analyses the loop holes available on regular the risk is an integral part of banking which bank needs to
interval and take the necessary corrective action fast for mitigate not avoid as the avoidance of risk never gives a
continuous and smooth functioning of banking processes. better result to the bank.

38 | 2024 | AUGUST | BANKING FINANCE