WORST CONDITION SIMULATION STRESS TESTING

Annual Report 2013 PT Bank Mandiri Persero Tbk. Business Continuity Management In order to secure Bank operations during an emergency, the Bank has a comprehensive, documented and tested comprehensive plan setting out the steps that must be taken prior, during and after the emergency. The Bank’s policies and procedures for safeguarding business operations are set out in the Business Continuity Management Plan BCM, which consists of an Emergency Response Plan ERP, Disaster Recovery Plan DRP and Business Continuity Plan BCP. ERP is a manual to ensure the security and safety of employees in emergency situations, DRP is a work plan for recovery from an emergency afecting the Bank’s IT infrastructure, and the BCP contains procedures and information designed to maintain the operations of a line unit.

5. WORST CONDITION SIMULATION STRESS TESTING

Stress testing is done to evaluate the Bank’s resilience in meeting extreme exceptional but plausible external situations; so as to provide the basis for contingency planning, and as to fulill regulatory requirements. Stress testing has the objective of estimating losses and the capital resilience of the Bank in absorbing such losses, as well as to identify steps to mitigate the risk and maintain capital. The Bank conducts two types of stress tests, which are: sensitivityshock analysis and scenario analysis historical or hypothetic. Stress testing simulations are based on actual scenarios, comprehensive models and an automated calculating system. Stress testing models cover primary risks such as credit risk, market risk and liquidity risk. For credit risk, a stress testing model has been developed having regard to best practice to cover the wholesale, consumer and retail segments, among others, through an econometric model linking credit risk factors with macroeconomic factors. In 2013, there were many inluencing conditions at both the global and regional levels, such as uncertainty in several European countries, low growth in developed countries and China, the situation in the United States including the debt ceiling crisis, high levels of volatility in the inancial markets and a number of domestic issues. Bank Mandiri has conducted stress testing and prepared the necessary contingency plans if these trends were to come to crisis point. During 2013, quarterly stress tests were conducted using standard shock parameters and scenarios simulating stress conditions. During 2013, a number of scenario analyses were developed for baseline, moderate and worst cases with reference to current conditions and historical global and domestic issues, such as increases in fuel prices, the minimum wage, electricity prices and interest rates. Bank Mandiri has proved its resilience in facing the global inancial crisis of 2008 and the crisis in Europe in 2011 without any signiicant losses or shocks. Nevertheless the Bank continues to maintain the Business Command Center in operational mode during 2013 as an integrated crisis management center to anticipate the impact of the crisis and global recession. In respect of this strategy, Bank Mandiri received the “Asian Banker Risk Management Award” for the category of Achievement in Liquidity Risk Management. risk management Annual Report 2013 PT Bank Mandiri Persero Tbk.

6. OTHER RISKS