Risk Management Committee Working Unit Risk Owner ORM Coordinator Internal Audit

10 Consolidated Financial Statements 09 Cross Reference of Annual Report Award 2016 Criteria 08 Corporate Social Responsibility 07 Integrated Corporate Governance 06 Corporate Governance

4. Operational Risk

A. Qualitative Disclosure

Operational risk is the risk due to insufficiency andor failed internal processes, human error, system failure, andor the presence of external events which affecting the operations of Bank Mandiri. Operational risk can lead to other risks such as reputation risk, strategic risk, legal risk, market risk, credit risk, compliance risk, liquidity risk, the risk of intragroup transactions and insurance risks. The management of operational risk effectively and consistently can minimize the emergence of other risks. Operational risk is inherent in all activitiesoperations of Bank Mandiri while running business process. Bank Mandiri implemented the Operational Risk Management effectively to reduce the frequency andor impact of operating losses. In general, the implementation of the Operational Risk Management is expected to give positive impact to Bank Mandiris stakeholders. Operational Risk Management Organization The implementation of operational risk management involves all elements in Bank Mandiri, including the Board of Directors with active supervision by the Board of Commissioners. To that end, the Board of Commissioners and Board of Directors understand the risks faced by Bank Mandiri, and plays an important role in supporting and overseeing the success of its application in all operational units.

1. Risk Management Committee

is a committee which formed to assist the Board of Directors in performing the function of monitoring and control, among others through policy discussion, define strategies and procedures related to the Operational Risk Management of Bank Mandiri, monitoring risk profile and risk management to establish risk appetite. 2. The Builder Unit of Operational Risk System, Retail IT Operational Risk Group and Wholesale Operational of Risk Group , is the Operational Risk Management Unit, which responsible for formulating policies, strategies, frameworks and operational risk management tools as well as doing the implementation thereof.

3. Working Unit Risk Owner

, responsible for managing operational risk according to the authority and scope of work in every units, especially in ensuring that the control effectiveness have been carried out in accordance with the standard guidelines for operational activities.

4. ORM Coordinator

, monitor and review the effectiveness adequacy of operational risk management processes inherent to every activity and perform tests of controls against the assessment control by Risk Owner periodically.

5. Internal Audit

, provides independent, objective assurance and consulting services to give added value and improve the operational quality of Bank Mandiri. Operational Risk Management Mechanism Bank Mandiri has set policies and procedures for managing operational risk refers to the regulatory provisions and international best practices, particularly of Basel Committee recommendations. Policies and procedures for the implementation of operational risk management for the entire unit in Bank Mandiri, among others, Bank Mandiri Risk Management Policy KMRBM, SPO Operational Risk Management, Technical Guidelines for Operational Risk Management ORM Tools, and SPO Products or Activities. To support the process of managing operational risk, Bank Mandiri uses ORM Tools namely:

1. Risk Control Self Assesment RCSA