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118 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) FoR BEttER GovERNANcE

RISK MANAGEMENT
AND COMPLIANCE

The CRP presented material risk events or categories Market risk management in KWAP is anchored on the
with relevant details, including the corresponding risk Market Risk policies, guidelines, risk system and risk
levels and risk outlooks for a three-month horizon for controls in place, of which these are implemented to
respective risk category, tabulated in a risk heatmap and support sound and holistic market risk management. In
risk dashboard. addition, KWAP provides an independent risk review on
investment proposals, as well as periodic investment risk
In addition, to provide context and a clear understanding of reporting to senior management.
risk areas, CRP also delineates risk descriptions as well as
mitigation actions to address potential risks and threats at Market Risk Controls
both the corporate and operational levels, for each of the
risk categories highlighted in the reports. Market risk controls represent a series of market risk
limits implemented to manage the market risk-taking
CRP is reported and deliberated through quarterly Risk activities. There are periodically reviewed and adjusted to
and Compliance Committee (RCC) meetings and escalated reflect dynamic changes of KWAP’s investment strategy
to the Board Risk and Compliance Committee (BRCC) and external business environment. The key market risk
meetings accordingly. controls are illustrated below:

Timely reporting and deliberation of CRP are crucial
in identifying and assessing KWAP’s existing risk to manage the potential losses that could
management capacities and capabilities. Once the key Value-at- occur as a result of movements in market
risks are identified and documented, the main focus is Risk Limit rates and prices over a specified time
to integrate risk information into existing departmental horizon within a given confidence level.
governance structures, controls, and planning, as well as
its respective reporting cycles where the key risks can be to manage the sensitivity or change in
communicated effectively. value of a security or portfolio in response
to a change in interest rates. It also follows
Modified
This should methodically address all the risks associated the notion that interest rates and bond
with all the organisation’s activities and consequently Duration prices move in opposite directions. It is a
Limit
deliver benefits related to better informed strategic sensitivity analysis used to determine the
decisions, successful delivery of change, and increased effects of a 1% change in interest rates
operational efficiency. will have on the price of a bond.

MARKET RISK MANAGEMENT to assess the investment portfolio’s
Stress
Market risk is the risk of unexpected loss resulting from Testing vulnerabilities to historical stressed
adverse changes in the value of financial assets arising Exercise market events as well as ‘what-if’
from movements in interest rate, equity price and foreign scenarios.
exchange.