Risk Disclaimer
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A) This document serves to summarize the Risk Management Policy of madina-estatelimited.com ('the Company') about risk management, as well as the rules and regulations that the Risk Management department must adhere to to accomplish the following goals:
- To catalog the most pressing threats facing the company and detail the measures taken to control and lessen their impact.
- To lay forth a straightforward process for managing stock and derivative trade risk.
- To guarantee that all risk-related tasks are conducted consistently and uniformly with zero errors and complete transparency.
- To provide quicker response time, with the end goal of increasing customer satisfaction and revenue
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B) Company exposure to Credit Risk, Market Risk, Liquidity Risk, Compliance Risk, and Technology Risk is high due to the diversification of the business. Risk Management is an essential business function for the organization since it deals with everything that can change the level of risk that the business faces. It entails recognizing potential dangers, quantifying them, keeping tabs on them, and regulating them such that:
- Those in charge of making important decisions fully grasp what they are.
- Both the regulator and the board of directors have set limits on the risk that the company can afford to take.
- The Board's priorities and the company's strategy are consistent with major decisions.
- Sufficient capital available, at all times.
- The hazards are carefully assessed and managed through an ongoing monitoring approach.
As a financial intermediary, the Company's operations include the acceptance and management of various risks.
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A) Principles of Risk Management
To guarantee that all employees are led by the same vision and values that characterize the Company, the Company has established a few guiding principles. So that Risk Management becomes ingrained in the Company's culture, "We will respect risk" has been established as a crucial Guiding Principle. Each employee should believe in "owning the risk" and contribute to the company's "individual and collective responsibility" mindset of risk management.
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B) Approach to Risk Management
As a first step in our risk management strategy, we ask ourselves the following two questions to guide our decision-making process. „Would you recommend it?" and "Is it within our budget?"
- A four-tiered risk management framework is in place to supervise and manage risks, which supports the strategy at an execution level.
- A system of risk management to make sure every risk the company faces is taken seriously and handled well
- Clear boundaries and limits for how businesses can operate
- Clear SOPs and an approval process for services to reduce risks at the operational level e. Sufficient division of responsibilities to create multiple layers of protection
- A system for reporting exceptions to guarantee that policy and process deviations are properly handled
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C) Risk Management Structure
There is a "Four-tiered risk management structure" in place to help the company's risk strategy and management efforts. Down below, you can find the risk structure:
- Accountability, supervision, and assurance, or the "three lines of defense"
- Risk Management — This group is in charge of overseeing and controlling potential threats, as well as putting the risk management strategy into action.
- The combined roles of risk head and business head provide effective risk management, oversee operations, and foster a culture of risk.
- The Credit Team studies specific high-impact risk occurrences and makes sure the organization follows the stated risk framework.
- The Investment Committee shall assess high-impact risk occurrences and define the Company's risk framework.
- The present governance structure of the Company is outlined below, with the Board of Directors and Risk Committees responsible for overseeing the effective management of risk across all of the Company's business activities:
- Committee for Credit
- Committee for Investments
- Committee for Risk Management
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D) Roles and Responsibilities
* Department of Risk
First and foremost among the defenses is the Risk Department, which answers to the COO. It is responsible for the following:
- Putting a risk framework into action
- Outlining product-specific risk policies and limitations
- Putting a risk framework into action • Outlining product-specific risk policies and limitations
*Executives and Committees on Risk
The Company's primary risk bodies are the Board and its many Risk Committees, which include the following Committees:
*Committee on Investment and Credit
All credit decisions are made by the Investment Committee and the Credit Team. Committees and teams tailored to certain businesses often have established guidelines for things like quorum membership, maximum allowable exposure, and the level of supervision from higher-ups.
*Committee for Handling Asset Liability
To keep the maturity mismatches in the Company's Balance Sheet within desired levels, the Asset Liability Management Committee (ALCO) has been formed to keep an eye on the asset-liability gap, plan ways to reduce the risk it poses, and make sure there are enough liquid resources.
*Committee for Monitoring Risk
The majority of the Company's directors serve on the Risk Management Committee, which is responsible for supervising Risk Management at the Board level.
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E) Framework for Management of Risk
In keeping with its strategy and the external environment, the following "Eleven Key Risk Framework" has been implemented by the Company:
*Company Danger
There are two types of risks that businesses face: risks related to strategy and execution and risks related to the external environment. Value erosion can occur as a result of either of these factors.
*Risk of Credit
A client or counterparty's present or future refusal or incapacity to fulfill financial or contractual commitments is known as credit risk. The main elements of this risk include credit quality, collateral, and cash flow.
*Dangers in the Industry
The danger of financial loss due to unfavourable changes in market factors and instruments is known as market risk. The three main types of this type of risk are underlying price risk, volatility risk, and impact cost risk.
*Threat to Liquidity
Asset liquidity risk and liability refinancing risk are the main forms of liquidity risk, which is the risk of not being able to satisfy financial obligations.
*Concerns over regulations
The danger of incurring penalties due to a failure to comply with the requirements of applicable laws and regulations is known as regulatory risk. Its main categories are Data Integrity, Governance, Legal, and Vigilance.
*Danger to Reputation
Reputation risk occurs when stakeholders have an unfavorable impression of the Group, which can impact the capacity to keep or build new commercial partnerships.
*Threat to Liquidity
Asset liquidity risk and liability refinancing risk are the main forms of liquidity risk, which is the risk of not being able to satisfy financial obligations.
*The potential for financial loss as a result of incidents involving technology, such as breaches in data security or service outages, is known as technology risk. Its main areas are Cyber Security Risk, Resilience, Scalability, and Project Risk.
*Risk in Operations and Processes
The danger of financial loss due to insufficient or malfunctioning procedures controls within a system, or carelessness on the part of humans is known as operational and process risk. The main categories of this risk include process risk, outsourcing risk, human mistake, and system error.
*Potential for Fraud
Anyone or anything acting dishonestly or illegally with the intent to benefit themselves is considered to be a fraud risk, whether they are internal or external to the organization. It primarily encompasses three types of fraud: employee, customer, and third-party.
*Humans Endanger
A company runs the danger of "people risk" when its leaders fail to assemble a team of capable individuals who share the company's values, work ethic, and culture and who can effectively implement strategies for both short- and long-term success. Its main categories include culture, ethics, people capability, and talent and availability.
*Risks to Physical and Infrastructural Setups
A physical and infrastructure risk might cause financial loss if essential services, infrastructure, and facilities were to fail or be disrupted as a result of a natural or man-made disaster, regardless of whether the personnel were safe. Employee Safety and Property Damage are the Two Main Areas Covered.
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F) Risk Culture
The Company's Risk Culture is Critical. As a result of the failure of policies and processes, the company's culture is seen as a shield. Surveys and other staff engagement activities are among the methods used by the company to assess its risk culture regularly. Risk Education and Awareness Programs are one of several ongoing efforts by the organization to foster a culture of risk-taking. Certain reward and recognition schemes are put in place to acknowledge and praise appropriate risk-taking behavior.
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G) Review of the Policy
The Board shall review and amend the Policy periodically as deemed necessary, keeping in view the business environment, the performance of the Company, regulatory requirements, and other relevant external factors.
