NOTES TO THE FINANCIAL STATEMENTS AT 31ST DECEMBER, 2013
(continued)
19.
FINANCIAL RISK MANAGEMENT (continued)
departments are responsible for managing the risks assumed through their operations and for ensuring that an adequate
return for the risks taken is achieved. The Credit Union’s policies are established to identify and analyse the risks faced by
the Credit Union. An environment of proper controls is continually pursued through a system of training, management
standard and procedures so as to ensure that all employees understand their roles and obligations.
Risk management structure (continued)
A Credit Committee and Supervisory Committee are appointed at each Annual General Meeting. The risk management duties of the Credit Committee are focused on credit risk in the Credit Union’s lending operations and the Supervisory Committee deals with operational risk profile of the Credit Union. The Management Committee acting with the authority delegated
by the Board has the overall responsibility for risk management on a day to day basis. The Board has also appointed key
committees such as, Policy Review Committee, Investment Committee, and Audit Committee to mitigate certain operational
risks.
Credit Risk:
Credit risk is the risk of financial loss to the Credit Union if a member or counter-party to a financial instrument fails to meet
its contractual obligations, and arises principally from the Credit Union’s loans to members and from its investments. The
Credit Union’s maximum exposure to risk is the carrying amount of the financial assets.
Concentration of credit risk exists if a number of clients are engaged in similar activities or are located in the same industry
sector or have similar economic characteristics such that their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. Concentration of credit risk indicates the relative sensitivity of
the credit union’s performance to developments affecting a particular industry or geographical location.
Management of Credit Risk
The Board of Directors through the Management and Credit Committee are responsible for the oversight of the Credit
Union’s credit risk. Some of the key responsibilities are as follows:
•
•
•
Formulating credit policies, establishing collateral requirements, credit assessment, establishing documentation
and legal procedures and implementing procedures to ensure compliance requirements.
Establishment of authorization structure for loan approvals.
Reviewing and assessing credit risk.
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