Page 174 - RFHL ANNUAL REPORT 2025 ONLINE_NEW

172 • Republic Financial Holdings Limited 2025 Annual Report • FINANCIALS

Notes to the Consolidated Financial Statements

For the year ended September 30, 2025. Expressed in millions of Trinidad and Tobago dollars, except where otherwise stated.

22 Risk management (continued)
22.1 General (continued)

The Board of Directors has ultimate responsibility for the management of risk within the Group. Acting with authority
delegated by the Board, the Credit, Audit, Asset/Liability Committee (ALCO) and Enterprise Risk Committee, review
specific risk areas.

A Group Enterprise Risk Management unit exists headed by a Chief Risk Officer, with overall responsibility for ensuring
compliance with all risk management policies, procedures and limits.

The Internal Audit function audits Risk Management processes throughout the Group by examining both the adequacy of
the procedures and the Group’s compliance with these procedures. Internal Audit discusses the results of all assessments
with Management and reports its findings and recommendations to the Audit Committees of the Parent and respective
subsidiaries.

The Group’s activities are primarily related to the use of financial instruments. The Group accepts funds from customers
and seeks to earn above average interest margins by investing in high quality assets such as government and corporate
securities as well as equity investments and seeks to increase these margins by lending for longer periods at higher rates,
while maintaining sufficient liquidity to meet all claims that might fall due.

The main risks arising from the Group’s financial instruments are credit risk, interest rate and market risk, liquidity risk,
foreign currency risk and operational risk. The Group reviews and agrees policies for managing each of these risks as
follows:

22.2 Credit risk
Credit risk is the potential that a borrower or counterparty will fail to meet its stated obligations in accordance with
agreed terms. The objective of the Group’s credit risk management function is to maximise the Group’s risk-adjusted rate
of return by maintaining credit risk exposure within acceptable parameters. The effective management of credit risk is a
key element of a comprehensive approach to risk management and is considered essential to the long-term success of
the Group.

The Group’s credit risk management process operates on the basis of a hierarchy of discretionary authorities. A Board
Credit Committee, including executive and non-executive directors, is in place, with the authority to exercise the powers
of the Board on all risk management decisions.

The Risk Management unit is accountable for the general management and administration of the Group’s credit portfolio,
ensuring that lendings are made in accordance with current legislation, sound banking practice and in accordance
with the applicable general policy of the Board of Directors. The Risk Management function is kept separate from and
independent of the business development aspect of the operations.

The Group uses a risk rating system which groups commercial/corporate accounts and overdrafts into various risk
categories to facilitate the management of risk on both an individual account and portfolio basis. Retail lending,
mortgages and retail overdrafts are managed by product type. Preset risk management criteria is in place at all branches
to facilitate decision-making for all categories of loans including credit cards. Trend indicators are also used to evaluate
risk as improving, static or deteriorating. The evaluation of the risk and trend inform the credit decision and determines
the intensity of the monitoring process.