Operational risk in 2015 Reputational risk management at DBS

Risk management 101 manage the crisis. Exercises are conducted annually, simulating varying scenarios to test the BCPs and crisis management protocol. Scenarios include incidents such as technology incidents having enterprise-wide impact on essential banking services, natural disasters with wide geographical area impact, safety-at-risk incidents e.g. terrorism and other events leading to significant business disruption. Senior management provides an attestation to the BRMC on an annual basis including the state of business continuity readiness, extent of alignment to regulatory guidelines and disclosure of residual risks. To mitigate losses from specific unexpected and significant event risks, DBS purchases group-wide insurance policies, under the Group Insurance Programme, from third-party insurers. DBS has acquired insurance policies relating to crime and professional indemnity; directors and officers liability; property damage and business interruption; general liability and terrorism. Processes, systems and reports Robust internal control processes and systems are integral to identifying, monitoring, managing and reporting operational risk. We have implemented a web-based system that supports multiple operational risk management processes and tools including operational risk event reporting, risk and control self-assessment, key risk indicators, tracking of issues or action plans and operational risk reporting. Units are responsible for the day-to-day management of operational risk in their products, processes, systems and activities in accordance with the various frameworks and policies. RMG Operational Risk and other corporate oversight and control functions provide oversight and monitor the effectiveness of operational risk management, assess key operational risk issues with the units to determine the impact across DBS, report andor escalate key operational risks to relevant senior management and board-level committees with recommendations on appropriate risk mitigation strategies.

8.2 Operational risk in 2015

The total operational risk losses in 2015 decreased to SGD 10.8 million 0.10 of DBS’ total operating income, compared to SGD 13.5 million 0.13 in 2014. The loss profile net loss greater than SGD 10,000 and based on the date of detection of the operational risk event, was mainly categorised into the following four Basel risk event categories: i internal fraud; ii external fraud; iii clients, products and business practices; iv execution, delivery and process management; and v business disruption and system failure. ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ Execution, delivery and process management and external fraud accounted for 96 of the Group’s operational risks losses in 2015. Losses were highest in the category of execution, delivery and process management which arose from a few isolated incidents and mitigating actions have been taken accordingly. The losses from external fraud were due largely to credit card fraud. Nevertheless, our credit card fraud losses were lower than the industry benchmark. Basel risk event types 2015 2014 SGD million SGD million Execution, delivery and process management 55 External fraud Clients, products and business practices ฀ ฀ ฀ ฀ ฀ Total 10.80 100 13.54 100 DBS Annual Report 2015 102 We view reputational risk as an outcome of any failure to manage risks in our day-to-day activitiesdecisions as well as from changes in the operating environment. These risks include: a. Financial risk credit, market and liquidity risks b. Inherent risk operational and businessstrategic risks

9.1 Reputational risk management at DBS

DBS’ approach to reputational risk management comprises the following building blocks: Policies We adopt a four-step approach i.e. prevent, detect, escalate and respond to reputational risk events. As reputational risk is a consequence from the failure to manage other risk types, the definitions and principles for managing such risks are articulated in the respective risk policies. These are reinforced by sound corporate values that embed ethical behaviours and practices throughout DBS. Policies are in place to protect the consistency of the DBS brand and to safeguard our corporate identity and reputation. Risk methodologies Under the various risk policies, we have established a number of mechanisms for ongoing risk monitoring. These take the form of risk limits, key risk indicators and other operating metrics, as well as the periodic risk and control self-assessment process. Apart from observations from internal sources, alerts from external parties stakeholders also serve as an important source to detect potential risk reputational risk events. In addition, there are policies relating to media communications, social media and corporate social responsibility to protect DBS’ reputation. There are also escalation and response mechanisms in place for managing reputational risk. While the respective risk policies address the individual risk types, the Reputational Risk Policy focuses specifically on stakeholders’ perception of how well DBS manages its reputational risks. Stakeholders include customers, government agencies and regulators, investors, rating agencies, business alliances, vendors, trade unions, media, general public, Board and senior management, and employees. We recognise that creating a sense of shared value through engagement with key stakeholder groups is imperative for our brand and reputation. For more information on how we engage our stakeholders, see page 20. Processes, systems and reports Units are responsible for the day-to-day management of reputational risk by ensuring that processes and procedures are in place to identify, assess and respond to reputational risk. Events of reputational risk impact are also featured in the reporting of risk profiles to senior management and board-level committees.

9.2 Reputational risk in 2015