PT Bank Mandiri Persero Tbk.
C. risK oVErViEw
Bank Mandiri conducted an integrated and bankwide evaluation of its risks.
Uncertainties Description
Mitigation global crisis and
economic growth slowdown
The European sovereign debt crisis has afected in economic growth
slowdown and money market volatility. The weakening economic
in china and india has threathened commodity demand.
• Conducted a comprehensive and periodical stress testing, and developed contingency plan.
• Operated Business Command Center as an integrated crisis management center.
• Closely monitoring of industry sectors with potential impact from crisis and recession, for example mining, commodity and textile.
loan concentration
over exposure on individual or entity, related group of entity, geographical
region, industry sectors, speciic products and others, with similar
systematic criteria, will create huge loss potential.
• Application of Portfolio Guideline PG tools on every stage of credit risk management.
• Application of exposure limitation through limit policy industry limit and debtor limit.
Amendment on government
and regulators regulations
Regulations amendment from regulators that may increase the
Bank’s exposure level. Adjustment on the Bank portfolio and risk exposure, thereby to reduce the
impact from policy amendment by the governmentregulator, among others through Bank portfolio diversiication, increase capital, and other.
Business process complexity and
wider network coverage
in line with aggressive and non- organic business growth, Bank
Mandiri has a variety and complex business range as well as wider
network encompassing overseas oices and subsidiary.
• Application of Enterprise Risk Management in risk management implementation.
• Implementation of consolidated risk management with subsidiaries that engaged in inance, in stages and sustainably
increased competition in
banking industry improving economy in the country
give impact to banking industry competition, with one example of
interest rate pricing. • Strategy implementation as market leader in funding pricing.
• Implementation of risk based pricing, which is a various loan interest rates to the customers based on its credit risk.
internal external fraud
A deliberate action of violation or breach done to deceive, cheat, or
manipulate the bank, customers, or other party that occurred in the
bank andor the use of bank facilities that causing the bank, customers,
or other party sufers losses and or perpetrators of fraud to obtain
inancial gain, either directly or indirectly.
• Risk awarenenss improvement at work units was conducted among others through “letter to ceo”, “no surprise” program socialization to Work units,
the ceo direction presentation through video to all work units, culture program, applicationsystem to detectprevent fraud ATM, credit card,
operational risk identiication and detect a possible fraud with Risk control Assessment oRM Tools, other tools and information as well as tough
sanctions to the perpetrators.
• ORM implementation that monitored periodically in the Operational Risk Management Forum conducted in Regional oice and Head oice.
• Due diligence process implementation and risk management toward customers refers to Bank indonesia regulation and based on the risk-based
approach principles.
The following are risk uncertainties and mitigation activities carried out by Bank
Mandiri in 2012:
d. EnTErPrisE risK ManaGEMEnT ErM
ERM is integrated risk management connecting strategic planning,
risk appetite, business execution, risk assessment and performance
evaluation; to optimize business growth based on risk-adjusted return as well as
to maximize shareholder value. Bank Mandiri implements ERM and at the
same time applies the Basel II Accord in stages based on Bank Indonesia’s
regulations. To comply with Bank Indonesia’s regulations, in Circular Letter
No.136DPNP dated 18 February 2011 concerning The Calculation of Credit
Risk weighted Assets ATMR with the Standardized Approach, Bank Mandiri
completed the calculation of capital adequacy utilizing the Standardized
Approach.
ERM implementation coverage is done with a two-prong approach,
namely capital risk management and operational activity risk management;
thereby expecting to achieve risk management that is embedded within
business management.
SUPPORTINg UNITS REvIEw
ERM also provides a common language to all work units, thereby
minimizing silo’s between work units and increasing relationships and
synergies between risk management functions with internal controls;
including all subsidiaries. Further, ERM has the role to increase
transparancy and accountability in the management of business and risk.
CAPITAL RISK MANAgEMENT Bank Mandiri implements Capital Risk
Management covering the Capital Resource Diversiication policy that
is in line with the long-term strategic plan, and an eicient capital allocation
policy on business segments with optimum risk-return proile includes
placement on subsidiaries. The objective is to meet stakeholders’
expectations including that of investors and regulators.
Bank Mandiri ensures it maintains adequate capital to cover credit risk,
market risk and operational risk, based on applicable regulations regulatory
capital as well as internal needs economic capital. on calculating
capital adequacy on credit risk, market risk and operational risk, the Bank
refers to Bank indonesia’s regulations Basel ii. The Bank uses Basel ii’s
standardized Approach for credit risk, and has begun a simulation approach
in stages based on internal Ratings. The Basel ii standardized Approach of
credit risk refers to Bi circular letter no. 136DPnP and this does not
unclude calculating external debtor ratings; however the Bank has done
the simulation on the use of concerned external ratings. The Bank applies the
standardized Model for market risk; meanwhile the Bank has used value at
Risk internally as an internal model. For operational risk, the Bank uses Basel ii
Basic indicator Approach and has done the simulation of the standardized
Approach. The Weighted Assets ATMR calculation and capital adequacy as of
December 2012 is stated on the right table:
RISK MANAGEMENT
PT Bank Mandiri Persero Tbk.
Rp.billion 2012
Core Capital Paid-in Capital
11,667 Disclosed Reserves
44,369 Deduction Factor of Tier 1 Capital
1,597
Total Core Capital 54,439
Tier 2 Capital 7,509
Total Capital 61,948
Weighted Assets ATMR
Credit Risk Standardized Approach 350,761
Market Risk Standardized Model 1,044
Operational Risk α 15 Basic Indicator Approach
48,385
Total ATMR 400,190
CAR Core Capital 13.60
CAR Total Capital 15.48
Based on BI regulations, a minimum 5 Core Capital from ATMR and a minimum 8 Total Capital from ATMR.
Based on the calculation simulation of capital expense on operational risk with
the Standardized Approach, the ATMR was posted at Rp47.3 trillion compared
with Basel II Basic Indicator Approach amounting to Rp48.4 trillion.
Capital expense for credit risk with Standardized Approach as of December
2012 has provided assets composition based on risk weight as stated on the
right pie chart:
The Bank applies Advance IRBA Internal Rating Based Approach in calculating
the credit capital expense simulation. The Bank’s simulation with the
Advanced IRBA approach could lead to a higher capital adequacy of around 1
compared with the current approach.
Composition Asset Base On Risk weight Credit Risk SA - December 2012 1
1 1
14 11
41 27
4
Risk weight 0 Risk weight 20
Risk weight 35 Risk weight 40
Risk weight 50 Risk weight 75
Risk weight 100 Risk weight 150