Strategic Risk Laporan Tahunan 2016 PT Bank Mandiri (Persero) Tbk versi B.Inggris

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

6. Reputation Risk

Reputation risk is the risk faced by the Bank as an impact of the negative perception of stakeholders to the Bank which coming from various undesirable events such as negative publications over the Banks operations, violation of business ethics, customer complaints, governance weaknesses and other events that can degrade the image of the Bank. Reputation Risk Management Organization The reputation risk is managed by the Corporate Secretary Group and performed by all working units within the company, including Customer Care Group, Strategic Marketing Group, and IT Strategy and Infrastructure Group. In its function, Corporate Secretary Group is responsible to the Board of Directors and came under the direct supervision of President Director. Thus, in addition to the President Director, Corporate Secretary Group also provides report to the associate director whom related with the incidence of reputation. Reputation Risk Management Mechanism Reputational risk is managed through the mechanism of oversight, handling and settlement which coordinated by the Corporate Secretary Group by referring to the provisions of Standard Guidelines for Corporate Secretary. Implementation of Reputation Risk Management Policy As the implementation of reputation risk management policies, the President Director assures that all working units have been performing the function of each well and according to the applicable regulations. In case there is potential events affected the reputation risk related to the duties and functions of particular working unit, so the working unit is obliged to provide detailed information to the Corporate Secretary Group in order to manage the incident so as to minimize the impact. Currently, Bank Mandiri has an official channel to receive complaints and questions from customers, such as call center 14000, website, branches, including conventional media and social media. All complaints are forwarded to Customer Care Group to get the handling and settlement. On these duties, Customer Care Group collaborates with the Corporate Secretary Group, particularly in handling customer complaints related with conventional media and social media. Separately, Corporate Secretary Group also monitors and evaluates of various reports and then releases them in conventional media and social media periodically to measure the effectiveness of the companys publication and communication activities. Furthermore, monitoring and evaluation results will serve as the basis of publications and communication activities for the next period in order to strengthen the companys reputation on an ongoing basis. In its function as the coordinator of managing reputation risk of the Company, Bank Mandiri also have several internal units, such as the Corporate Communication Department and Corporate Social Responsibility CSR Department which has the authority and ability to create a positive image of the company through communication programs and social activities of the company. Whereas in the context of crisis or incident reputation highly critical and massive so it affects the confidence of stakeholders or shareholders, Corporate Secretary Group assumes full responsibility for implementing the action plan which is expected could minimize the impact of the crisis, among others preparing the strategy of problem management, determining the internal sources and executing schedule of crisis management activities, as well as the overall evaluation.

7. Strategic Risk

Strategic risks is risk faced by Bank Mandiri due to inaccuracy in the decision andor implementation of a strategic decision and the failure in anticipating the changes in the business environment. Strategic Risk Management Organization The Bank has established a Risk Management Committee and Risk Management Unit which aims to support the comprehensive risk management, integrated, measurable and controllable. Every committee supported by a working group whose members consist of groups that directly related to the risk problems including within the scope of the committees. Strategic Risk Management Mechanism In conducting strategic risk management, Bank Mandiri constantly reviews the performance and evaluate the draft of business targets policy and conduct corrective measures in developing strategic plans and business targets taking into account the internal and external conditions, if necessary. Bank Mandiri continues to support the strengthening of the implementation of programs supporting financial performance management through the development of automated budgeting, PMS enhancement and development of Executive Information System EIS. Implementation of Strategic Risk Management Throughout 2016, considering the external and internal conditions of Bank Mandiri, the Management Policy until 2020 will be focused on three main strategies, namely sharpen the wholesale business by intensifying the wallet share of customer wholesale segment deepen client relationship, accelerating its expansion in the retail segment Accelerate growth in the segment, as well as strengthening the integration of Mandiri Group integrate the group. Further explanations are as follows: • Deepen client relationship wholesale segment, to achieve the aspirations of becoming Indonesias Wholesale Transaction Bank, Bank Mandiris policy is to offer holistic and integrated products and services which capable to serve the needs of end to end customer. Wholesale business development was done by strengthening the Relationship Manager RM with expertise in priority sectors. With the development of trade between countries these days, the big corporations in Indonesia continues to expand its business abroad. Bank Mandiri as the leading wholesale bank in Indonesia which has a powerful corporate customers base, provide a strategy to serve the customers follow the principle of the worker, follow the trade. 03 Company at a Glance 04 Management Discussion and Analysis on Companys Performance 05 Review of Business Support Function 01 Main Highlights 02 Management Report • Accelerate in Growth Segment, comprised of three segments, namely: 1 Micro Segment, 2 Individuals Segment, and 3 SME Segment. • Integrate the Group strategy is the Group that aims to increase the synergy in every working units by optimizing all existing resources in Bank Mandiri and its subsidiaries in order to support each other through cross-selling. Steps and Plans in Anticipating Strategic Risk Here are the risk management strategies in 2017: • Slowdown of economic impact on business growth and credit quality has driven Bank Mandiris loan expansion carefully prudent, as well as made the selection sector is prospective and not vulnerable to economic turmoil, monitoring watch list, better management credit to an end to end, and so forth. • Controlling the formation of CKPN by reviewing and following up on account which potentially problematic, to anticipate the unexpected condition. • Focus on the fund retail deposits in the segment of small business, micro and consumer individual. • Conduct efficiency programoverhead cost savings and more in-depth assessment for initiatives that have an impact on overhead costs initiatives that do not have immediate impact on revenuePL, without the exclusion of aspects of service and profitability. Macroeconomic and banking conditions are expected to remain unfavorable. It will increase the external risk in which the performance of national economy this year still need to be wary, especially the economic recovery which is still running slower than expected. Reorganization and implementation of which is still in the process of improvement and repair.

8. Compliance Risk