Figure 8: Effect of Derivatives on Interest Rate Structure on Borrowings—June 30, 2012 Borrowings Including Derivativesa Borrowings Excluding Derivativesa Fixed 4%
Variable 18%
Variable 96%
Fixed 82%
a. Excludes discount notes.
Figure 9: Effect of Derivatives on Currency Composition on Borrowings—June 30, 2012 Borrowings Excluding Derivatives Borrowings Including Derivatives South African Rand 2%
Others 12%
Pounds Sterling 5% Euro 9%
US Dollar 51%
Japanese Yen 10% Australian Dollar 11%
Euro 15%
US Dollar 83%
Japanese Yen 1% Others *%
* Denotes percentage less than 0.5%
SECTION V: FINANCIAL RISK MANAGEMENT
that are specific to multilateral development banks and international financial institutions.
The processes and procedures by which IBRD manages its risk profile continually evolve as its activities change in response to market, credit, product, operational and other developments. The Executive Directors, particularly the Audit Committee members, periodically review trends in IBRD’s risk profiles and performance, as well as any significant developments in risk management policies and controls. In addition, on an annual basis, Management prepares an integrated risk monitoring report for the Executive Directors to provide a holistic picture of risk management activities within IBRD.
The Finance Committee, which is chaired by the CFO, reviews, evaluates and decides on matters related to IBRD’s finances to ensure that these are aligned with corporate financial and risk tolerance objectives set by the Executive Directors. The topics covered by the Finance Committee include the following: IBRD’s financial policies and guidelines, new financial initiatives, setting of risk tolerances, and financial risk exposures. The Finance Committee makes recommendations and, where appropriate, makes decisions in the areas of financial policy, the adequacy and allocation of risk capital, and oversight of financial reporting.
Governance Structure The risk management governance structure supports senior management in their oversight function, particularly in the coordination of different aspects of risk management and in connection with risks that run across functional areas. IBRD’s Chief Risk Officer (CRO) reports directly to the CFO. The CRO is responsible for: (i) assessing risks; (ii) benchmarking existing risk management practices against major financial institutions; (iii) ensuring consistency of risk management activities with best practice; and (iv) considering unique risks
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THE WORLD BANK ANNUAL REPORT 2012
There are four subcommittees that report to the Finance Committee (See Chart 1). These subcommittees provide technical expertise and guidance on strategy, policy, risk management and new initiative issues presented to the Finance Committee, enabling the group to make the decisions necessary to conduct appropriate oversight of IBRD’s financial issues.