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Annual Report 2013
Risk Management and Risk Factors Following the merger completed on September 11, 2012 between Kiatnakin Bank Public Company Limited (“the Bank” or “KK”) and Phatra Capital Public Company Limited (“Phatra”), a new organization structure of “Kiatnakin Phatra Financial Group” (‘the Group”) have been formed. The new structure comprises of the Bank, acting as parent company of the Group while undertaking commercial banking business, its equity market-related subsidiaries, namely Phatra Capital Plc., Phatra Securities Plc., KKTRADE Securities Co., Ltd., and Phatra Asset Management Co., Ltd., and the Erawan Law Office Co., Ltd., which provide legal support to the Group. Risk Management Overview
Business operations of the Group give rise to various risks from internal and external factors including changes in economic conditions, business environment and business operation procedures. The risks are classified in accordance with the Bank of Thailand (“BOT”) into 5 main risk types, specifically Credit Risk, Market Risk, Liquidity Risk, Operational Risk and Strategic Risk. The Group has established a risk management procedure of risk identification, measurement, assessment, monitoring and controlling. Risk management of the Group consists of the Risk Management Committee (RMC), Risk Management Department and Risk Management Units within the subsidiaries. The RMC reviews and sets risk management policy and guidelines. The Risk Management Department and Risk Management Units, independent from front office departments as well as risk owners, regulate and support the Group’s risk management. During 2012, the Group restructured its Risk Management Department according to the new business structure of the Group. Examples of this instance include the Market Risk Subdivision, formerly Market and Liquidity Risk, having been separated to accommodate a projected increase in transaction volume from the trading book. Another example is the addition of the Credit Review team and the Financial Institutions Counterparty Risk team under the Credit Risk Subdivision. A Risk Model Validation Management team was formed under the Risk Management Support Subdivision to control and support model risks within the Group. Moreover, the Operational Risk Committee (ORC) and the New Product and Process Review Sub-Committee (NPPRC) were
established to increase efficiency and productivity of operational risk management. Risk Management Policy and Risk Management Guideline
A key point in the risk management policy is the management of risks throughout the entire organization with emphasis on establishing, for each business department and unit, roles and responsibilities of understanding the risks of its business activities and managing such risks under the risk management policies and guidelines of the Group. The Risk Management Department’s role is to regulate, monitor and review the mechanics of risk management and control in each business unit and department. Furthermore, each business unit will be allocated capital, an amount depending on the level of its transaction risks and business operation losses. The Group arranges trainings and educates its employees on risk management to build an understanding of risk and encourage employees’ involvement in managing risk. Additionally, the Group consistently discloses risk management and capital information to the public. Risk Management Framework
The roles and responsibilities of the relevant committees and risk management authorities are as follows: Board of Directors Supervise the Group’s Risk Management Committee to ensure the determination of policy, procedures and control measures of risk management which covers strategic, credit, market, liquidity, and operational risks.