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GROUP RISK COMMITTEE CHARTER
1. Constitution
The quality, integrity and reliability of risk management of the ABIL group of companies are
delegated to the Group Risk Committee. The main purpose of the Risk Committee is to assist
the board of directors in discharging its duties relating to the identification of key risk areas
and key performance indicators in the ABIL group of companies. This includes the monitoring
of these factors as part of a regular review of processes and procedures to ensure the
effectiveness of its internal systems of control so that the decision making and accuracy of
reporting of the board are maintained at a high level at all times. The committee will:
• Set out the nature, role, responsibility and authority of the risk management function
within the group and outline the scope of the risk management function;
• Review and assess the integrity of the risk control systems and ensure that the risk
policies and strategies are effectively managed;
• Provide an independent and objective oversight and review the information
presented by management also taking into account reports by management and the
Group Audit Committee to the board on financial, business and strategic risk issues;
• Adopt the principles of governance and codes of best practice;
• Liaise with the board with respect to the preparation of the Committee’s report to
shareowners as required;
• Review the decisions of the divisional management Credit and ALCO committees.
Credit and ALCO decisions taken at the divisional management level will be reported to
the Group Risk Committee on a quarterly basis or more frequently should the need
arise;
• Assist the board to determine the maximum mandate levels for the various Credit
and ALCO decisions. To be further delegated to management.
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2. Membership
• The members shall consist of only and not less than three (3) non-executive
directors appointed by the board and meet any other requirement as per the Banks Act,
1990.
• The board shall appoint a chairperson from the non-executive members of the
Committee. The chairperson of the board shall not be eligible to be appointed as
chairperson of the Committee.
• At least one member of the Committee shall be a member of the Audit committee.
3. Responsibilities of the committee
3.1 General
The functions of the committee will be to:
• Review the risk philosophy, strategy and policies recommended by management
and ensure compliance with such policies and with the overall risk profile of the group.
Risk in the widest sense includes:
Credit risk, including adequacy of provisions
Interest rate, liquidity and solvency risk
Technology risk
Disaster recovery and business continuity risk
Operational risk
Reputational risk
Legal risk
Investment risk
Country risk
Price risk
Competition risk
Prudential risk; and
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Other risks appropriate to the business which may be identified from time to
time
• To facilitate and promote communication through reporting structures regarding the
matters above or any other matter between the board and the executive officers of the
Group;
• To ensure the establishment of an independent risk management function and
where the bank forms part of a group, a group risk management function. The head of
this function will act as a reference point for all aspects relating to risk management
within the bank, including the responsibility of arranging training to members of the
board in the various risk areas that the bank is exposed to;
• To introduce such measures as in the committees’ opinion may serve to enhance
the adequacy and efficiency of the risk management polices, procedures, practices and
controls applied within the bank; and
• Perform such other functions as may be prescribed by the Banks Act, codes of
conduct, JSE Listings Requirement or any other relevant legislation.
3.2 Credit Risk
The Committee will be required to:
• To recommend major amendments to the credit and collections policy including
credit risks for new product lines to the board for approval;
• To recommend the approval of the provisioning policy to the board and review
adequacy of provisions and accounting policy relating to provisions in consultation with
the Group Audit Committee where necessary;
• Review the status of the book/s in line with the risk appetite of the group as
approved by the board;
• Review sector, employer & 3rd party exposures where applicable;
• Determine & review credit & collections policies;
• Approve & review employer facilities;
• Review exceptions;
• Approve credit mandates; and
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• Ensure different loan products are adequately priced for risk
3.3 Interest and Liquidity Risk
The objective is to derive, approve and monitor the most appropriate strategy for the
bank in terms of the mix of assets and liabilities given its perceptions of the future and
the potential consequences to interest-rate movements, liquidity requirements and
capital adequacy.
The committee shall have the power to determine the strategy for the bank in terms of
the mix of assets and liabilities and recommend to the board for approval.
The Committee will ensure that the following processes are applied by the ALCO:
• Review the bank’s previous results to determine if the projections set at the
previous ALCO meeting were achieved;
• Assess the bank’s current balance sheet position;
• Develop and simulate asset and liability strategies;
• Simulate interest rate scenarios;
• Determine the most appropriate asset and liability strategy;
• Set measurable targets to achieve the asset liability strategy;
• Communicate the targets to line functions (operations and treasury);
• Monitor actions regularly to ensure compliance with the strategies decided on;
• Evaluate the success of the current strategy; and
• Given environmental volatility, re-evaluate the current strategy on a regular
basis to determine its appropriateness.
The ALCO will report adherence to the above to the Risk Committee on a quarterly
basis or more regularly if required.
The Risk Committee will set certain funding, liquidity and credit parameters/ limits within
which the ALCO has to operate.
3.4 Operational Risk
The functions of the committee will be :
• To assist the board in its evaluation of the adequacy and efficiency of the risk
policies, procedures, practices and controls applied within the bank in the day-to-day
management of its business;
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• To assist the board in developing a risk mitigation strategy to ensure that the bank
manages the risks in an optimum manner;
• To assist the board in the identification of the build up and concentration of risk
,including credit, reputational, technological, legal and product risk to which the bank is
exposed ; and
• To assist the board in ensuring that a formal risk assessment exercise is undertaken
at least annually
3.5 Information Technology (IT) Risk
The committee accepts that technology has a fundamental impact on the way in which
business is conducted and businesses are measured. Therefore, the committee will
ensure that:
• Risks associated with the IT environment and projects are continuously evaluated
and appropriate plans are in place and implemented to mitigate these risks to an
acceptable level;
• IT expenditure is motivated by- sound commercial principles rather than strategic
instinct only i.e. that the business strategies and IT strategies are aligned;
• A long-term IT plan is developed and review the appropriateness thereof to ensure
that it supports and does not inhibit the long-term strategy of the group;
• Developments in the IT industry are continuously monitored and potential impact
thereof on the groups long-term strategy is evaluated;
• The necessary skills are in place to ensure that the internal control systems are
adequately applied across the entire IT environment; and
• Appropriate Disaster Recovery and Business Continuity Plans are developed and
maintained (tested)
3.6 Legal and Insurance Risk
• The committee together with the company’s legal advisor will review any legal
matter that could have a significant or potentially significant impact on the group.
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• The Committee will review the adequacy of insurance coverage
3.7 Sensitivity/ Sustainability Risk
The committee will ensure that sensitivity risks, for example environmental, health and
safety risks are monitored.
4. Reporting and accountability
• The chairperson of the Committee shall account to the board for its activities and
make recommendations to the board concerning the adequacy and efficiency of the risk
polices, procedures practices and controls applied within the group in the day-to-day
management of the business and any other matters arising from the above
responsibilities.
• The chairperson (or, in his/her absence, an alternate member) of the Committee
shall attend the annual general meeting to answer questions concerning matters falling
within the ambit of the Committee.
5. Meetings
• Meetings of the Committee will be held as frequently as the Committee considers
appropriate, but it will normally meet not less than four times a year. The board or any
member thereof, including members of the Committee, may call further meetings.
The quorum for decisions of the Committee shall, if the Committee consists of 3 or 4
members, be any 2 members of the Committee present throughout the meeting of the
Committee. Should the Committee consist of five (5) members, at least three (3) members
have to be present throughout the meeting to constitute a quorum and so on.
The finance director, senior audit partner in charge of the external audit, credit risk officer
and the group risk officer shall be in attendance at meetings of the Committee and shall
have unrestricted access to the chairperson or any other member of the Committee as is
required in relation to any matter falling within the remit of the Committee.
• The chairperson, at his or her discretion, may invite other employees to attend and to be
heard at the meetings of the Committee.
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• No attendee, other than Committee members, shall have a vote at the meeting of the
Committee.
• The minutes of all meetings of the Committee, or summaries thereof, shall be submitted
to the board at the immediate following board meeting. The agenda for each such board
meeting shall provide an opportunity for the chairperson of the Committee to report orally on
any matters of importance as well as on the Committee’s findings and recommended actions.
• The secretary of the committee shall be the company secretary
6. Authority of the Committee and resources available to it
The Committee, in carrying out its tasks under these terms of reference:
• Is authorised to investigate any activity within its terms of reference;
• May, at the discretion of the Committee, require other employees of the company to
attend meetings or parts thereof;
• May consult with and seek any information it requires from any employee, and all
employees shall be required to co-operate with any request made by the Committee in
the course of its duties;
• May obtain such outside or other independent professional advice as it considers
necessary to carry out its duties
7. General
• These terms of reference may from time to time be amended as required, subject to
the approval of the board.
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