RM-1.1 RM-1.1 Risk Management
Board of Directors' Responsibility
RM-1.1.1
The Board of
Directors oflicensees must take responsibility for the establishment of an adequate and effective framework for identifying, monitoring and managing risks across all its operations.October 2010RM-1.1.2
The CBB expects the Board to be able to demonstrate that it provides suitable oversight and establishes, in relation to all the risks the
licencee is exposed to, a risk management framework that includes setting and monitoring policies, systems, tools and controls.October 2010RM-1.1.3
Although authority for the management of a firm's risks is likely to be delegated, to some degree, to individuals at all levels of the organisation, the overall responsibility for this activity should not be delegated from its governing body and relevant senior managers.
October 2010RM-1.1.4
A
licencees's failure to establish, in the opinion of the CBB, an adequate risk management framework will result in it being in breach of Condition 6 of the Licensing Conditions of Section AU-2.6. This failure may result in the CBB withdrawing or imposing restrictions on thelicensee , or thelicensee being required to inject more capital.October 2010RM-1.1.5
The Board of
Directors must also ensure that there is adequate documentation of thelicensee's risk management framework.October 2010Systems and Controls
RM-1.1.6
The risk management framework of
licensees must provide for the establishment and maintenance of effective systems and controls as are appropriate to their business, so as to identify, measure, monitor and manage risks.October 2010RM-1.1.7
An effective framework for risk management should include systems to identify, measure, monitor and control all major risks on an on-going basis. The risk management systems should be approved and periodically reviewed by the Board as outlined in HC-1.1.5.
October 2010RM-1.1.8
The systems and controls required by Paragraph RM-1.1.6 must be proportionate to the nature, scale and complexity of the firm's activities.
October 2010RM-1.1.9
The processes and systems required must enable the
licensee to identify the major sources of risk to its ability to meet its liabilities as they fall due, which include but are not limited to the following:(a) Counterparty Risk;(b) Liquidity Risk;(c) Market Risk; and(d) Operational Risk.October 2010