PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2006 Unaudited and 2005 Audited Expressed in millions of Rupiah, unless otherwise stated
133
56. RISK MANAGEMENT continued
Operational Risk Operational Risk Management ORM initiative’s goals are to effectively implement a Proactive Risk
Management by focusing on the mitigation of prioritized risks derived from risk assessment result to prevent potential losses and to support the achievement of the Bank’s goals and targets. Proactive risk
management will enable the Bank to better achieve its targets and still take into account the prudential principles in the Bank’s business activities. The operational risk management initiative in Bank Mandiri
consists of three major components:
• The Bank has written ORM policies and guidelines in accordance with the latest Bank Indonesia Regulation,
• Operational Risk Profile supported by the use of ORM tools and information system implementation, and
• Implementation of ORM tools and information system including sufficient training. The Bank has applied the ORM process in several banking activities. the Bank has established the a risk
assessment process of New Products and Activities as a standard procedure in order to anticipate the inherent risk on a new product or new business activity, . All new products and services to be launched to
the customer must undergo a robust risk assessment review to prevent unanticipated risks. In the development of a new product and service all related units will be involved in risk assessment and risk
mitigation activities, operational risk management unit will be involved in the identification and measurement of the operational risk that might occur from the new product or service.
Significant efforts to correctly identify and mitigate operational risks in a comprehensive way have been conducted. The Bank will implement an information system and standard procedures to record loss events
and to mitigate the operational risk in a systematic way. The information system should increase capability of the Bank in managing its losses, preventing the same type of loss events and increase the service
quality to the customer. From the loss event database the Bank will be able to obtain the product and unit risk profile. The loss event database compilation is also an indispensable part of the internal model for
operational risk capital adequacy calculation.
To further improve the Bank’s operational risk management’s ability up to an International Best Practice, on June 27, 2006 the Bank entered into addendum agreement with ABN Amro Bank for ORM Extension
Mandate. With the agreement, the Bank plans to increase the competency of the operational risk management unit and implement ORM Tools, including an up-to-date information system and procedures
in order to decrease the loss occurrences, more efficient capital adequacy reserve for operational risk and improve the Bank’s reputation.
57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES
a. Integrated Banking System Agreement with PT Silverlake Informatikama and Silverlake Corporation On July 20, 2001, Bank Mandiri entered into an agreement with PT Silverlake Informatikama for the
procurement of software and installation services for a total integrated banking system which is called e- MAS, for a total contract value of US43,213,658 full amount excluding 10 VAT. Additional projects
have been contracted involving a value of US18,606,562 full amount on April 23, 2002, US420,000 full amount on August 28, 2003 and US838,301 full amount on April 12, 2004. The estimated
percentage of completion of the contract as of June 30, 2006 is 95.81 or amounting to US65,386,950.57 full amount including VAT had been recognized as premises and equipment.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2006 Unaudited and 2005 Audited Expressed in millions of Rupiah, unless otherwise stated
134
57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
b. Agreement with PT Suprima Nusantara SNP On December 16, 2004, Bank Mandiri has entered into an agreement with SNP which has then been
amended with an addendum. Based on the addendum agreement, Bank Mandiri has an option to become a shareholder of SNP if Bank Mandiri disburses a financing facility to SNP andor its consumers,
either directly or indirectly, of up to Rp1,000,000 or effective 2 two years after the signing date of such agreement dated December 16, 2004 that is on December 16, 2006, whichever is earlier.
The agreement was notarized under Deed No. 37 by N.M. Dipo Nusantara Pua Upa, S.H., dated December 16, 2004.
c. Agreement on development of Operational Risk Management with ABN AMRO Bank N.V. On February 25, 2005, Bank Mandiri and ABN AMRO Bank N.V. entered into agreement to develop
Operational Risk Management to assist the Bank in operational risk management implementation process and has been revised with an addendum. The agreement was meant as a mean for transfer of
knowledge to increase the Bank and the employees capability in operational risk management, and to increase the capability to measure and calculate capital allocation in accordance with Basel II standard.
Based on the agreement, ABN AMRO Bank N.V. will support the development of Bank Mandiri internal capability in operational risk management. The capability development will be conducted through nine
action tracks in the form of transfer of knowledge and advisory. The agreement’s value is USD 1,200,000 full amount and planned to complete on June 30, 2007.
d. Agreement on Implementation of e-Learning In order to support Bank Mandiri’s plan to focus on strategic excellence and operational excellence, the
training infrastructure for an e-Learning program was established by the Bank. Bank Mandiri signed a three-year contract agreement with PT Mitra Integrasi Komputindo as a representative of Intralearn Asia
Pte. Ltd. Singapore involving a total contract value of US7,213,200 full amount as stipulated in contract letter No. CHC.TRNTPD.PK.00282003 dated July 30, 2003.
e. Additional Prudential Supervision Requirements from Bank Indonesia Based on the result of the meetings between Bank Mandiri and Bank Indonesia on May 23, 2003 and a
follow up meeting on August 25, 2003, Bank Indonesia through letter: No. 55DGSDPwB2 dated August 29, 2003 regarding August 25, 2003 Meeting’s Main Result
No. 58DGSDPwB2 dated November 17, 2003 regarding Progress Report of the Follow Up of August 25, 2003 Meeting’s Main Result
required Bank Mandiri to meet the following conditions before expanding its corporate credit portfolio: a. Secondary reserve liquid assetstotal assets
≥ 12 b. Cost of funds to total assets ratio
≤ 7.5 c. Core earning to total assets ratio
≥ 1.5
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2006 Unaudited and 2005 Audited Expressed in millions of Rupiah, unless otherwise stated
135
57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
