PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006 Expressed in millions of Rupiah, unless otherwise stated
121
55. RISK MANAGEMENT continued
The committee is included in Risk and Capital Committee RCC that was established on October 10, 2001. RCC is responsible for establishing Bank-wide risk management policies, such as reviewing internal
limits, establishing funding and loan related interest rate policies, loan policies, new product launching and monitoring the implementation of established policies and procedures to identify, measure and mitigate
risk. The scope of responsibility and function of the committee has undergone several changes. The latest
changes which were implemented in the first half year of 2006 were to focus the RCC into three sub committees, which are: Asset Liability Committee, Risk Management Committee and Capital
Investment Committee. With the improvements, the scope of control and responsibility over each risk has become more focused and more effective. Each committee is supported by working group whose
members are consisting of groups directly related to the risk problems included in the committee’s scope. The Bank has established an organizational structure that is able to support risk management in a more
comprehensive, centralized, measurable and controllable way, by establishing the Risk Management Working Unit that is under Risk Management Directorate. The Risk Management Directorate is
responsible for managingcoordinating all risks encountered by the Bank, such as credit risk, market risk, operational risk, liquidity risk, legal risk, reputation risk, strategic risk and compliance risk, including
defining risk management guidance and policies.
The Risk Management Directorate is led by a Director who reports to the Board of Directors and also a voting member in the Risk and Capital Committee. The Risk Management Directorate is divided into 2
two main functions: 1 Credit Approval as a part of the four-eye principle, and 2 Independent Risk Management which is divided into several groups in relation with credit and portfolio risk, operational risk
and market risk. Risk management implementation frame work is stated in the Bank Mandiri Risk Management Policy
KMRBM which is the guidance for specific risk management such as Bank Mandiri Loan Policy, Trading Policy and Asset Liability Management Policy.
One of the risk management implementation is producing quarterly Bank’s risk profile that is reported to Bank Indonesia in accordance with Bank Indonesia schedule. The risk profile describes Bank’s business
activities inherent risk including risk control system for each risk type. Other than quarterly report to Bank Indonesia, the Bank internally produced risk profile especially monitoring of action plan implementation with
shorter period such as monthly basis in order to detect risk earlier and more accurate. For the risk management system integratation; Bank Indonesia’s regulation and Basel II compliance and
action plan of Basel II Compliance Committee establishment, the Bank is developing Enterprise Risk Management ERM in alignment with the Bank’s strategic and operasional need.
ERM is a comprehensive and bank-wide integrated risk management system, so that the risk management become an embedded process in the Bank’s business process and contribute a value
added to the Bank and stakeholders especially related to the implementation of Strategic Business Unit SBU organization and Risk Based Performance.
The ERM inisiative that was started since 2004 as the early stage of comprehensive risk management has arrived to producing the datamart and procurement ERM system stage. With ERM, it is estimated that
the market, credit and operational risk management can be performed better, not only as compliance with regulation and reporting to Bank Indonesia, but becoming an integrated part of Bank’s daily business
decision making.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006 Expressed in millions of Rupiah, unless otherwise stated
122
55. RISK MANAGEMENT continued
Credit Risk The Bank’s credit risk management mainly concentrated on balancing the performing loans expansion
and prudential loans management in order to prevent collectibility downgrade or Non Performing Loan NPL and optimize capital utilization allocated for credit risk.
To support this matter, Bank has established policies and written guidelines regarding loans disbursement, which includes the Bank Mandiri Credit Policy KPBM, Credit Manual PPK, and
Temporary Memorandum Credit Policy and Procedures that has not been accommodated in the KPBM and PPK. The purpose of those guidelines are to provide a comprehensive loan management manual
related to loan application, analysis process, approval process, documentation, monitoring and restructuring processes, including risk analysis and assessment.
In order to ensure prudential loan process, the Bank reviews and improves its credit policies periodically to fit with the current business. In alignment with the Strategic Business Unit SBU implementation, the
Bank produced Policies and Standard Loans Procedures SPK for each business segment in order to have better focus on capturing the business need by each business segment. Currently the completed
SPK are SPK of Corporate segment, SPK for Commercial segment, SPK for Small segment, SPK for Micro and Consumer segment.
In principles, credit risk management is implemented on both transactional and portfolio level. On transactional level, the Bank has implemented four-eye principle whereby every loan approval will involve
Business Unit and Risk Management Unit independently to obtain an objective decision. Four-eye principle process is conducted through the Credit Committee within the authority limit and credit decision
process are made through Credit Committee. The holder of credit decision authorization as credit committee member has competence, abilities and integrity. Therefore, the loan process becomes more
comprehensive and more prudent. As part of prudential banking practice, the party with authority in deciding loan disbursement beside using
the Loan Analysis form and financial spread sheet, the Loan Analysis form NAK also using Tools Rating BMRS and Scoring Tools MBSS SMESS to perform credit risk assessment more accurate and
interest rate risk based pricing. The Bank has Credit Rating and Credit Scoring Model Design and Development Guidance, which is a complete guidance for the Bank to create credit rating and credit
scoring model. Those models are implemented into the Credit Risk Tools as one of the credit decision tools. To monitor the performance of credit rating and credit scoring model, the scoring and rating result
performed by Business Units was reviewed periodically. Performance of rating model validation provides current performance model condition. As monitoring, rating scoring managed in the database, the Bank
produced Credit Scoring Review and Rating Outlook issued quarterly and semi annually. Those reports also stated information regarding attributeparameter scoring established by economic sectors. It is
valuable for Business Unit especially as guidance in setting targeted customer with performing classification in order to support prudential loan expansion.
Scoring and rating tools also intended to provide more objective assessment to the debtors so that lower risk debtors will get different treatment then the higher risk debtors.
To increase the Turn Around Time of loan disbursement, the Bank performed initiatives such as enhancement of Credit Memo for Corporate, Commercial, Small Business, Financial Institution and
Overseas Office that are more oriented with comprehensive risk analysis in order to support quick and accurate prudential banking based credit decision. Other than that, in order to prevent non-performing
loans, the Bank has developed and implemented Loan Monitoring System process and Early Warning Analysis for performing debtors to identify debtors who have high potential to be downgraded to NPL so
that the Management could immediately decide the account strategy and early action to obtain optimal result in order to minimize the Bank’s NPL growth.
