TheBRMCsetsouttheoverallapproachesforidentiication,monitoring,managementandreportingofcredit,market,liquidity, operationalandreputationalrisks.TofacilitatetheBRMC’sriskoversight,riskmanagementcommitteeshavebeenestablishedasfollows:
RISK MANAGEMENT COMMITTEES
RiskExecutiveCommitteeRiskExCo TheRiskExCoprovidescomprehensivegroup-wideoversightanddirection
relatingtothemanagementofallrisktypesandistheoverallexecutive bodymandatedbytheBRMConriskmatters.
ProductApprovalCommitteePAC ThePACprovidescomprehensivegroup-wideoversightanddirection
relatingtonewproductapprovals–animportantriskmitigationelement withinDBS.
GroupCreditRiskModelsCommitteeGCRMC GroupCreditPolicyCommitteeGCPC
GroupCreditRiskCommitteeGCRC GroupMarketandLiquidityRiskCommitteeGMLRC
GroupOperationalRiskCommitteeGORC EachofthesecommitteesreportingtotheRiskExCoarebroadlymandated
–withinthespeciicriskareas–toserveasanexecutiveforumfor discussionanddecisionsonallaspectsofriskanditsmanagement.
Keyresponsibilities: •
Assessrisktaking •
MaintainoversightoneffectivenessofDBS’riskmanagement infrastructure,includingframeworks,decisioncriteria,authorities,
policies,people,processes,information,systemsandmethodologies •
Approveriskmodelgovernancestandards,stresstestingscenarios, riskmodelsandassessperformanceoftheriskmodels
• Assesstherisk-returntrade-offsacrossDBS
• Identifyspeciicconcentrationsofrisk
ThemembersinthesecommitteescompriserepresentativesfromRMG aswellaskeybusinessandsupportunits.
Theabovecommitteesexcludingthosemarkedwithanasterisk aresupportedbylocalriskcommitteesinallmajorlocations.The
localriskcommitteesprovideoversightoflocalriskpositionsacross allbusinessesandsupportunitsandensurecompliancewithlimits
setbythegroupriskcommittees.Theyalsoapprovelocation- speciicriskpoliciesandensurecompliancewithlocalregulatory
risklimitsandrequirements.
TheChiefRiskOficerCROhasbeenappointedtooverseethe riskmanagementfunction.TheCROisamemberoftheGroup
ExecutiveCommitteeandreportstotheChairmanoftheBRMC andtheCEO.TheCROisindependentofbusinesslinesandis
activelyinvolvedinkeydecisionmakingprocesses.
TheCROalsoengagestheregulatorsonaregularbasistodiscuss riskmatters.
Workingcloselywiththeestablishedriskandbusinesscommittees, theCROisresponsibleforthefollowing:
• ManagementoftherisksinDBS;includingdevelopingand
maintainingsystemsandprocessestoidentify,approve,measure, monitor,controlandreportrisks
• Engagementofseniormanagementonmaterialmattersrelating
tothevarioustypesofrisksanddevelopmentofriskcontrolsand mitigationprocesses
• Ensuringtheeffectivenessofriskmanagementandadherenceto
theRiskAppetiteestablishedbytheBoard
4 RISK APPETITE
Thepursuitofourstrategicprioritiesandbusinessopportunities inherentlycarriesrisk.TheBoardhasestablishedanoverallRisk
Appetite,whichissupervisedbytheBRMC.Ourriskstrategyisto linkourRiskAppetitewithDBS’strategicandoperationalobjectives.
TheembeddingofRiskAppetiteinDBSstartswithaformally deinedRiskAppetiteStatementsetbytheBoard.Wehave
establishedtheRiskAppetiteFrameworkwhichcoversthe governanceprocessestoensureadherencetotheRiskAppetite
Statement.TheFrameworkalsoservestoreinforceourriskculture through‘tonefromthetop’articulationoftherisksthatweare
willingtoaccept.Astrongorganisationalriskculture,includingan appropriateincentiveframeworkpleaserefertoRemuneration
Reportsectiononpage77,helpstofurtherembedRiskAppetite atDBS.
4.1 Risk Constraining Thresholds and Use
of Economic Capital OurRiskAppetiteconsidersthevariousrisktypesandis
operationalisedviathresholds,policies,processesandcontrols. Theinclusionofthresholdstructuresintotheriskframeworks
isintegralindrivingRiskAppetiteintoourbusinesses.Effective thresholdsareessentialinmanagingaggregateriskswithin
acceptablelevels.Portfoliorisklimitsforthequantiiablerisktypes arecascadedfromRiskAppetitethroughatop-downapproach
andoperationalisedthroughformalframeworks.Othersigniicant riskaspectsareguidedbyqualitativeexpressionofprinciples.
G O
VER N
A N
C E
RISK APPETITE CAPITAL ALLOCATION
Credit Risk
Manage Concentration
Risk through the use of Triggers
and Limits
Market Risk
Manage Market Risk through the
use of Limits Manage through
Frameworks, Policies and
Standards
Operational Risk
Maintain Counterbalancing
Capacity to meet the Liquidity
Risk Exposure
Reputational Risk
Manage through Frameworks,
Policies and Standards
• Obligor
• Industry
• Country
Transfer Risk
Obligor Economic Capital Triggers
• Corporate
• Banks
Tail Value-at-Risk TVaR Limits
• Total
• BusinessGroup
• BusinessUnit
• Entity
• Desk
Regulatory Capital
Industry Economic Capital Triggers
• Financial
Institutions •
Non-Financial Institutions
Country Transfer Risk Limits
• Strategic
• Non-strategic
• Trading Book
Product Desk •
Banking Book Business
Segment
Liquidity Risk
• Currency
• Legal Entity
4.2 Stress Testing
StresstestingisanintegralpartofDBS’riskmanagementprocess. Italertsseniormanagementtoourpotentialvulnerabilityto
exceptionalbutplausibleadverseevents.Itenablesustoassess capitaladequacy,identifypotentialriskyportfoliosegments,
inherentsystematicrisksandprovidesanopportunitytodeine mitigatingactionsbeforetheonsetofanadverseevent.
Appropriatestresstestingisconductedatleastannuallyorat suitableintervalsgiventhereadingofmicroandmacroeconomic
conditions.Allstresstestsaredocumented,includingcontingency plans,exitstrategiesandmitigatingactionsappropriateto
differentscenarios. Toensurethatouroverallriskandrewardsarealignedwithour
RiskAppetite,weintegrateICAAPintoourRiskAppetitesetting. ThroughICAAP,thecapitalplanningprocesstakesintoaccountthe
demandforcapitalunderarangeofstressscenariosandcompares themagainsttheavailablesupplyofcapital.Capitaldemandis,
inturn,afunctionofgrowthplansandthetargetcreditrating speciiedintheRiskAppetiteStatement.Basedontheassessment
ofcapitalneeds,thecorrespondingriskcapitalforcreditrisk andmarketriskaredeined.
InordertoensurethatthethresholdsemanatingfromtheRiskAppetitearefullyrisksensitivetoindividualriskdriversaswellasportfolio effects,wehaveadoptedEconomicCapitalECasourprimaryriskmetric.ECisalsodeployedasacorecomponentinourInternalCapital
AdequacyAssessmentProcessICAAP.
ThefollowingchartprovidesabroadoverviewofhowwecascadeRiskAppetite.PleaserefertoSections5to9formoreinformationon eachrisktype.
5 CREDIT RISK
Creditriskarisesfromourdailyactivitiesinvariousareasofbusiness–lendingtoretail,corporateandinstitutionalcustomers;trading activitiessuchasforeignexchange,derivativesanddebtsecurities;andsettlementoftransactions.Creditriskisoneofthemostsigniicant
measurablerisksfacedbyDBS.
Lendingexposuresaretypicallyrepresentedbythenotionalvalueorprincipalamountofon-balancesheetinancialinstruments.Financial guaranteesandstandbylettersofcredit,whichrepresentundertakingsthatDBSwillmakepaymentsintheeventthatacustomercannot
meetitsobligationstothirdparties,carrythesamecreditriskasloanseventhoughtheyarecontingentinnature.Pre-settlementCredit ExposuresPCEfortradingandsecuritiestransactionsaremeasuredtakingintoaccountcollateralandnettingarrangements.Settlement
riskistheriskoflossduetothecounterparty’sfailuretoperformitsobligationafterDBShasperformeditsobligationunderanexchange ofcashorsecurities.
PleaserefertoNote41.1totheFinancialStatementsonpage169fordetailsonDBS’maximumexposuretocreditrisk.
5.1 Credit Risk Management at DBS