June 10, 2014

Aptivaa was the knowledge partner at the very recently held Risk Symposium, 2014 organized by “The Association of Banking Sector Risk Professionals”, Sri Lanka at Cinnamon Grand, Colombo. The Risk Symposium was the first of its kind held on 9th and 10th June 2014 in Sri Lanka. Several international risk management specialists shared the best practices of Risk Management in the symposium with a focused approach to its application in the local context. The theme of the event was “Challenges in Risk Management – A Basel Perspective” focusing on challenges in implementing BASEL lll, new liquidity rules, Pillar – 2 (ICAAP), increasing long term shareholder value through Basel and other current topics relevant to the risk management profession.

Giving the key note address, Ms. Yvette Fernando, Central Bank of Sri Lanka (CBSL) Director of Bank Supervision pointed out that Risk Management is a process that attempts to identify, measure, monitor and manage any credit risk. Any bank risk management can be broadly handled at institutional, regulatory and market level. “These levels when put together will ensure a safe and sound banking and financial systems”, she said.

Sandip Mukherjee, COO & Principal, Aptivaa, presented on “Stress Testing: Regional Best Practices” throwing holistic insights on the growing importance of Stress Testing over the years, Stress Testing Methodologies, the Regulatory Expectations on Stress Testing by Basel and Regional Central Banks, and the way forward for CBSL for implementation of Stress Testing Methodology in Sri Lankan Banking.

Sharing the importance of stress testing in today’s environment, Sandip Mukherjee said it has increased responsibilities on board and senior management and helps them in addressing key risk issues. “Stress testing helps in the identification of worst-case scenario and associated loss and determines the level of concentration risk and assesses the risk appetite of the firm,” he said. He mentioned that regulators in western countries are emphasizing on an integrated stress testing framework based on macro-economic scenario. “The regulators in India and Malaysia have proposed a combination of sensitivity and scenario analysis. However, the Central Bank of Sri Lanka has not yet published detailed guidelines on stress testing,” he noted. “Our recommendation for stress testing in Sri Lanka is to continue following sensitivity approach, develop internal remodels and gather relevant data. Also it is advisable to follow a top down, one stage model once sufficient data is available,” said Mukherjee.

He was also one of the panelists in a concluding panel discussion to interact with the audience. The discussion was moderated by CB Director Ms. Yvette Fernando.

Aptivaa, in affiliation with its partner Bartleet Transcapital, also conducted a survey to assess the status of implementation of Integrated Risk Management Guideline issued by CBSL. The survey questionnaire covered various aspects such as risk oversight, risk appetite, FX risk, risk modeling approaches, involved parties, management policy and key risks that impact the Sri Lankan financial system. The results of the survey will be published soon.

The conference also familiarized the participants with the recent Basel III regulatory developments and compliance requirements and gave a clear perspective as to what should be the road ahead while conceptualizing Risk management as a process and incorporating it at the institutional, structural, regulatory and market levels.