Risk management strategy
Risk management strategy is based on the currently applied business strategy. KELER has built its risk strategy on conservative and prudent risk management principles. It has also developed its methods, processes and built-in controls, in accordance. Besides the owners and the Board of Directors, several other committees (i.e. Asset-Liability Committee, Risk Committee, User Committee) operate in KELER, which are responsible for managing, monitoring or commenting on a specific part of the risks. The Central Bank of Hungary regularly monitors KELER’s operation in its supervisory and its overseer function. KELER is basically a transparent and low-risk profiled infrastructure.
Components of the risk management strategy include:
In the light of the special role it plays, KELER's objective is to make sure that its capital position is both stable and reliable and that its risks are transparent and properly managed at all times.
- risk appetite (willingness to take risk, ability to take risk):
Risk appetite can be determined by surveying the willingness and the ability to take risk.
In case of KELER there is a barrier to interpreting the risk appetite as the willingness to take risk is almost entirely determined by legislations applicable to KELER. KELER is a central securities depository regulated by CSDR1, which in addition to core services also provides non-banking and banking type ancillary services, therefore besides the Tpt.2, the institution is also regulated by the Hpt.3 and CRR4. CSDR defines the core and ancillary activities of KELER and, together with other pieces of legislation, stipulates also prudential requirements.
The capacity to take risks is determined by the values of the own funds, which can be stable or volatile depending on medium term profitability.
Based on the above, KELER’s risk appetite, compared to traditional banking risks, is significantly limited by the legislative environment and the internal regulations that reflect them; consequently, the management’s potential risk appetite is significantly restricted by the regulation.
It follows from the above that the creation/development of KELER’s risk structure primarily depends on external circumstances. Most important factors are the regulatory environment, restrained internal willingness to take risks and the activities of the securities settlement system which causes fluctuation in KELER’s risk taking (simultaneously with the revenues that serve as funds for capital increase).
- the structure of risk management and its position within the organisation:
The Risk Management Department is organized under the direct authority of the CEO. The Risk Management Department provides KELER's operational risk management and risk control function. The Risk Management Department is managed by the Chief Risk Officer, who also performs CSDR risk management duties.