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About the Bank Learn about the Bank’s strategy Learn about the Bank’s governance policies, practices and standards The Bank’s financial performance Statements from senior decision-makers of the Bank Relationships with customers, business partners and investors The Bank’s environmental and societal commitment

Risk Management

For a financial services company such as SAIB, operating in today’s global business environment, requires a careful identification of the different types of risks, managing the risks, and balancing risk and return. This includes efficient allocation of regulatory capital to support healthy balance sheet growth. Being a custodian of customer deposits, the Bank has to apply best in class risk management practices in order to safeguard the interests of customers, investors and other stakeholders. Hence, the Bank has a well-defined and documented risk management framework in place to prudently fulfil its role as a custodian and intermediary, as well as to rigorously comply with regulatory requirements.

At the apex of the risk policies and procedures of the Bank is the Risk Management Policy Guide, prepared in conformance with the requirements of the Saudi Arabian Monetary Authority (SAMA). This describes in detail the risks the Bank is exposed to and the policies and mechanisms in place to measure, manage and control the risks. Some of the main governance manuals developed for this purpose are the Risk Appetite Framework (RAF), Credit Policy Guide and Treasury Policy Guide.

The RAF is the cornerstone of the Bank’s risk management and is overseen and approved by the Board of Directors. It monitors and measures risk tolerance in a structured and transparent manner and infuses risk management considerations into the Bank’s strategy and operations. The Board is supported by the Board Risk Committee which recommends policies for Board approval and oversees key risks within the Bank. There are also several supporting committees at Management level including the Enterprise Risk Management Committee, the Credit Committee and the Asset and Liability Committee. At the Departmental level, the Bank has a Risk Management Group headed by the Chief Risk Officer.

The RAF is aligned with the Bank’s strategic planning, business planning, capital planning and policies and documents issued by the Board of Directors. The RAF sets out the nature of risks arising from the Bank’s strategy. It defines the maximum level of risk the Bank could take without hampering its operations (risk capacity); the maximum level of risk the Bank is willing to take (risk appetite); maximum level of other quantifiable risks (other risk limits); and the desired risk-return trade-off.

In addition to the RAF, the Board has also approved the Risk Assessment Policy Guide which includes the Risk Appetite Policy Framework, Credit Policy Guide, Treasury Policy Guide, Stress Test Policy, Internal Capital Adequacy Assessment Plan Policy, Operational Risk Policy, Fraud Risk Policy, Information Security Policy among others. The Board is also responsible for approving and implementing policies to comply with SAMA guidelines, accounting and reporting standards (including IFRS9 in relation to anticipated credit loss provisioning) and best industry practices such as Basel guidelines. A comprehensive Group IFRS 9 Governance Policy Framework was approved in 2018. This is backed by additional Management level policies such as the IFRS 9 Data Management and Control Framework Policy and the IFRS 9 Governance Framework.

In addition to the above, the Bank’s Internal Audit Function reports to the Audit Committee of the Board of Directors and conducts an independent validation of compliance with risk policies and procedures and the adequacy and effective of the risk management framework. This reflects the “three lines of defence” risk management approach adopted by the Bank, whereby the front line business units are made risk aware, the support functions such as the Risk Management Group are an important second line of defence, and Internal Audit is the third line.

A description of the different types of risks the Bank is exposed to and how the Bank manages these risks is given below:

GRI Indicators GRI 102-11