Risk management at Nikoil ICB OJSC is carried out in accordance with the standards and rules of the Central Bank of the Azerbaijan Republic and the Chamber for Supervision of Financial Markets, recommendations of the Basel Risk Management Committee, as well as in accordance with Nikoil ICB policy, internal rules and procedures.
The Supervisory Board exercises control over the risk management of the bank as a whole: it confirms the risk strategy and policy, the risk of the bank’s appetite, limits and relevant reports and standards, and also controls the activities of the Bank's Management Board in the field of risks.
The Risk Management Committee approves documents related to risk management policies, risk limits, risk management models. CSD provides periodic monitoring of the bank's activities in the field of risk management and its improvement in accordance with generally recognized practice.
The Management Board of the Bank manages the activities of the Bank, fulfilling its duties and achieving the goal in accordance with the risk policy and strategy confirmed by the Supervisory Board. The Board is also involved in the preparation and improvement of emergency plans, risk of appetite and other risk indicators.
The Chief Executive Officer for Risk Management is the main person responsible for risk management activities. It ensures correct and timely reporting, controls the corporate risk limit and a strategy to minimize risks. The Chief Risk Management Director oversees three divisions: business risk management, retail risk management, and operational risk management.
The departments of risk management departments carry out risk assessments, prepare relevant reports, monitor the quality of the portfolio, analyze risks in business processes, inform the Bank's Management Board and make recommendations.
Internal auditors verify the activities of all the above divisions of the bank. The internal audit unit informs the audit committee of the bank about the results of the audit.
Credit Risks: These are risks arising as a result of untimely or incomplete fulfillment by the borrower of his obligations to the bank.
The methodological basis for credit risk management is approved by the Supervisory Board requirements for loan products, procedures for the preparation, analysis and approval of credit projects.
Depending on the amount of the loan application, decisions on loan projects are made by authorized collegial bodies of the bank endowed with the appropriate authority.
Further control over the quality of the loan portfolio is carried out through various types of monitoring.
Credit risk management is also implemented through the planning of a loan portfolio. Planning involves the diversification of the portfolio by applying limits to loan products, loan amounts, geographical location, type of activity, as well as currency requirements.
The loan portfolio is analyzed using risk management tools:
Special reserves are created to cover potential losses on assets (IFRS + Regulatory requirements).
Market Risks: these risks arise from changes in market interest rates, exchange rates, and the value of securities and goods.
Macroeconomic indicators are analyzed and, based on the analysis, the impact on the portfolio is predicted and evaluated.
To manage interest rate risks, the impact of changes in interest rates on securities, profitability and capital is assessed and regulated.
To do this, use the following tools:
Liquidity Risks: this risk arises as a result of the impossibility of timely and effective fulfillment of planned and unexpected obligations.
Short-term and long-term liquidity management models are prepared and selected; the structure of assets and liabilities is also determined.
The following tools are used:
Operational risks: these risks arise due to shortcomings and errors made by bank employees, problems and shortcomings in information systems and technologies, as well as non-banking events.
Methods and models for operational risks are selected and implemented.
A risk map has been developed on the basis of which the risk level is estimated.
The risk assessment of procedures, transactions and various types of activities of the bank. Control over the current procedures and their implementation is carried out, recommendations are given for improving these procedures.
Compliance risks, as part of operational risks, are a legal risk that arises as a result of non-compliance with the legalization of money or other property acquired by criminal means and legal acts in the field of financing of terrorism, including the requirements of the supervisor and financial monitoring body.
This type of risk is managed through the use of a number of measures to combat money laundering and the financing of terrorism.
There are a number of measures to identify and identify counterparties that meet the requirements of KYC (Know Your Costumer Policy). Taking into account the developed measures to optimize operational risks, the Bank assesses customers whose risk level is above the average.
Strategic risks: this risk arises from the wrong choice of strategic goals.
Compliance with the bank's long-term roadmap is monitored.
Traced economic, political, social and other trends that determine the transition to a new business environment.
The assessment of alternative business areas is monitored. Rational use of resources is monitored. The rational use of strategic decisions, etc. is monitored.