Strategic Report Strategic Report Strategic Report Financial Additional Overview Strategy Performance Governance Statements Information Bank risk management The Bank’s risk management system is based on The Bank is the principal driver of the Group’s revenue the principle of continually assessing risk throughout and operates in the financial services sector, therefore, the life of any operation and includes such stages as: its risk management and internal control framework are • risk identification; fundamental to that of the Group. The work undertaken • qualitative and quantitative assessment by the Bank’s risk management bodies feeds back directly of a particular risk; to the Group. • determination of an acceptable risk level; • risk monitoring and mitigation; Given the significance of the Bank, the risk management • ongoing monitoring and control allowing efficient and internal control framework in place at the Bank are adjustments in case of any changes in the conditions described below. on which the preliminary risk assessment was made; and • analysis of the effectiveness of the risk The role of the Bank in the overall management system. risk management structure Management of risk is fundamental to the Banking Bank risk management bodies Business and is an essential element of the Group’s The principal risk management bodies of the Bank operations. The main risks inherent in the Bank’s are the: Supervisory Board, Audit Committee*, Risk operations are credit risk, liquidity risk, market risk Committee, Management Board, Internal Audit, Treasury, (including currency and foreign exchange rate risks), Credit Committee, Asset and Liability Management operational risk and legal risk. The following is a Committee (the “ALCO”), AML and Compliance and Legal description of the Bank’s risk management policies and department. The Supervisory Board, Audit Committee procedures in respect of those risks. Business risks such as and Risk Committee perform similar roles as the Group changes in the environment, technologyad idustry are Board, the Group Audit Committee and the Group Risk monitored through the Group’s strategic planning process. Committee, only at Bank level. Risk management bodies of Bank of Georgia Risk Committee Audit Committee Supervisory Board of Bank of Georgia Internal Audit Credit Committee Management Board Asset and Liability Management Board Credit risk Portfolio risk Operational risk AML and Quantitative risk management management management Treasury Compliance Legal management and risk analytics Management Board. The Management Board has The Internal Audit department is independent of the overall responsibility for the Bank’s asset, liability and risk Bank’s Management Board. The Head of the Internal Audit management activities, policies and procedures. In order department is appointed by the Bank’s Supervisory Board to effectively implement the risk management system, the and reports directly to the Bank’s Audit Committee. The Management Board delegates individual risk managementBank’s Internal Audit department discusses the outcomes functions to each of the various decision-making and of all assessments with the Bank’s Management Board execution bodies within the Bank. and reports its findings and recommendations to the Bank’s Audit Committee. Internal Audit department. TheBank’s Internal Audit department is responsible for the regular review/audit of the Bank’s operations, activities, systems and processes, in order to evaluate and provide reasonable, independent and objective assurance and consulting services designed to add value and improve the Bank’s operations. *In January 2019, Audit Committee of the Bank was transformed into the Audit and Corporate Governance Committee in accordance with NBG Corporate Governance Code. Annual Report 2018Bank of Georgia Group PLC 51