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Risk governance

Risk governance

KBC’s risk governance model is characterised primarily by:

  • the Board of Directors, assisted by the Risk and Compliance (RRC) Committee, which sets the risk appetite each year, monitors risks and proposes action, where necessary.
  • an integrated architecture centred around the Executive Committee that links risk appetite, strategy and performance goal setting.
  • the Risk Management Committee and activity-based risk committees mandated by the Group Executive Committee.
  • risk-aware business people, who act as the first line of defence for conducting sound risk management in the group.
  • a single, independent risk function that comprises the Group Chief Risk Officer (CRO), local CROs, local risk functions and the group risk function. The risk function (together with the compliance function) acts as the second line of defence, while Internal Audit is the third line.

Risk management information

The business of bancassurance is exposed to a number of typical risks, such as credit risk, market risk , liquidity risk , technical insurance risk, operational risk and other non-financial risks. Controlling all these risks is one of the most crucial tasks of management.


More information on risk management can be found in:

 

Most material sector-specific risks

Sector-specific risks How are we addressing them? Information in the 2015 annual report
Most material sector-specific risks

Credit risk

The potential negative deviation from the expected value of a financial instrument caused by default on the part of a party to a contract, due to the inability or unwillingness of that party to pay or perform, or due to particular situations or measures on the part of political or monetary authorities in a particular country. Any concentrations in the loan portfolio can have a particularly significant impact.

  • Existence of a robust management framework
  • Recording impairment charges, taking risk-mitigating measures, optimising the overall credit risk profile, etc.
p. 85-96

Market risk in non-trading activities

Structural market risks, such as interest risk, equity risk, real estate risk, currency risk and inflation risk. Structural risks are risks inherent to the commercial activity or long-term positions.

  • Existence of a robust management framework
  • ALM VaR limits at group level, for each risk type and entity; supplemented by other risk-measuring methods, such as Basis Point Value (BPV), nominal amounts, limit tracking for crucial indicators, etc.
p. 96-101

Liquidity risk

The risk that KBC will be unable to meet its payment obligations as they come due, without incurring unacceptable losses.

  • Existence of a robust management framework
  • Liquidity stress tests, management of funding structure, etc.
 

Market risk in trading activities

The potential negative deviation from the expected value of a financial instrument caused by fluctuations in interest rates, exchange rates, and share or commodity prices.

  • Existence of a robust management framework
  • Historical VaR method, duration, ‘greeks’ for products with options, stress tests, etc.
p. 105-108

Technical insurance risks

Risks stemming from uncertainty as to how often insured events will occur and how extensive they will be. Low interest rates are a focus point here, as is demographic ageing.

  • Existence of a robust management framework
  • Underwriting, pricing, claims reserving, reinsurance and claims handling policies, etc.
  • Developing new products
p. 108-111

Operational and other non-financial risks

The risk of loss resulting from inadequate or failed internal processes and (ICT) systems, human error or sudden external events, whether man-made or natural.

  • Existence of a robust management framework
  • Group key controls, Loss Event Databases, Risk Scans (bottom-up and top-down), Case Study Assessments, Key Risk Indicators (KRIs), etc.
p. 111-113

Solvency risk

Risk that the capital base will fall below an acceptable level.

  • Existence of a robust management framework
  • Statutory and in-house minimum solvency ratios, active capital management, etc.
p.114-121

 

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