Mega Bank Annual Report 2017

24 Mega Bank -24- Item Content 4. The Bank ’ s business units and General Affairs and Occupational Safety & Health Department, Controller ’ s Department, Data Processing & Information Department, Overdue Loan & Control Department, Risk Management Department, Digital Banking Department, Anti-Money Laundering & Financial Crime Compliance Department, Operation Center, Regional Business Centers, etc., conduct annual operational risk self- assessment to measure the Bank ’ s operational risk exposure and, based on the recommendations from the various units, validate the improvement of the existing control mechanism for preventing the occurrence of operational risk. D. Operational Risk Hedging or Mitigation Policy, and Strategies and Procedures for Monitoring the Continuing Effectiveness of Hedging and Mitigation Instruments 1. The Bank transfers the possible operational risk loss from the Bank ’ s employees, financial affairs and equipment through insuring on banker ’ s blanket bond insurance, fire insurance, earthquake insurance, third-party liability insurance, group personal accident insurance, etc.,. The Bank also reviews and renews annually to maintain the effectiveness of risk transfer. 2. The contract that the Bank signs with contractors for outsourced operations shall specify the scope of outsourced operations and the relevant regulations so as to clarify the attributions of responsibilities and transfer possible operational risk. Also, regular evaluations are conducted on the contractors for outsourced operations to ensure that the outsourced operations are in compliance with the relevant regulations of the competent authority. E. Method of Legal Capital Allocation The Bank currently adopts the Basic Indicator Approach (BIA) for operational risk regulatory capital charge. Market Risk Management System Year 2017 Item Content A. Market Risk Management Strategies and Procedures 1. Strategies: „ According to the risk management objectives and risk limits approved by the Board of Directors, supervise the entire bank ’ s market risk position and tolerable loss. „ According to the Bank ’ s "Market Risk Management Guidelines" and other relevant regulations, implement market risk management in order to attain operational objectives and maintain a healthy capital adequacy ratio. „ Establish market risk information system to enable effective monitoring of limit management, profit and loss assessment, sensitivity factor analysis, execution of stress test, etc., of the financial products ’ position, and compile a risk report to be submitted to the head for review and use as reference for decision-making. 2. Procedures: Set different types of risk management rules for financial products based on their different business natures and include the process for risk identification, measurement, monitoring and reporting into the regulations. The Risk Management Department monitors the compliance status of the transaction unit. „ Daily transactions: Prepare daily market risk position and income statement, compile and analyze domestic and overseas transaction unit data, summarize and analyze various financial products ’ position, assess profit and loss, sensitivity risk factor analysis, and submit monthly stress test results to enable the top management to understand the entire bank ’ s market risk exposure; and regularly compile the balances, gains and losses, and market assessments of investments in securities and trades of derivative financial products and submit to the (Managing) Board of Directors for the Board of Directors to understand the market risk control of the Bank.