4.
Financial risk management (a) Introduction and overview BRAC Tanzania has exposure to the following risks from its use of financial instruments: (b) Credit risk (c) Liquidity risk (d) Market risks (e) Operational risks. This note presents information about the BRAC Tanzania’s exposure to each of the above risks, the BRAC Tanzania’s objectives, policies and processes for measuring and managing risk. (b) Credit risk Credit risk is the risk of financial loss to organisation if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the BRAC Tanzania’s loans and advances to customers. For risk management reporting purposes, the BRAC Tanzania considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector risk). Management of credit risk Members of governing body have delegated responsibility for the management of credit risk to its Organisation’s Credit Committee. A separate organisation credit committee is responsible for oversight of the BRAC Tanzania’s credit risk, including:Formulating credit policies in consultation with business units, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements. • • • •
Establishing the authorisation structure for the approval and renewal of credit facilities. Authorisation limits are allocated to business unit Credit Officers; Reviewing and assessing credit risk. organisation’s credit assesses all credit exposures in excess of designated limits, prior to facilities being committed to customers by the business unit concerned. Renewals and reviews of facilities are subject to the same review process; Reviewing compliance of business units with agreed exposure limits, including those for selected industries, country risk and product types. Regular reports are provided to Organisation credit committee on the credit quality of local portfolios and appropriate corrective action is taken; and Providing advice, guidance and specialist skills to business units to promote best practice throughout the BRAC Tanzania in the management of credit risk.
The business unit is required to implement the organisation’s credit policies and procedures, with credit approval authorities delegated from the organisation credit committee. The business unit has a chief credit risk officer who reports on all credit related matters to local management and the group credit committee. The business unit is responsible for the quality and performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolios, including those subject to central approval.