Singapore Risk Management Guidelines for Board of Directors and Senior Management – An Overview and Summary of Requirements

  • By: Staff Editor
  • Date: April 19, 2013
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Monetary Authority of Singapore (MAS) introduced these guidelines on risk management practices for an institution’s board of directors and senior management. The board of directors and senior management play pivotal roles in ensuring a sound risk management culture and environment. These guidelines are applicable to all financial institutions.
Board of Directors Role and Responsibilities
  • The Board is collectively accountable to stakeholders, including shareholders, for the long-term success and financial soundness of the institution.
  • The Board should comprise members who collectively bring a balance of expertise, skills, experience and perspectives.
  • The Board members should act independently without any concentration of power in any particular member or a group of members of the Board.
  • The Board can delegate the decision making authority to a Board committee.
  • The Board should approve the institution’s organizational structure.
  • The Board should ensure that adequate corporate governance frameworks and systems are in place.
  • The Board should ensure that senior management formulates policies that promote fair practices and professionalism, with respect to internal dealings and external transactions.
  • The Board should receive regular training from time to time.
  • The Board should critically review its own performance and that of the Board committees periodically.
  • The Board should oversee the design and operation of the institution’s remuneration policies.
  • The Board should establish appropriate standards in appointing senior management
  • The Board should ensure an adequate succession planning plan to promote smooth management transition and minimize operational disruptions arising from changes in key personnel.
  • The Board should ensure that the institution’s related party transactions are undertaken on an arm’s length basis.
  • The Board and senior management should ensure that the institution’s recordkeeping systems produce adequate and reliable data for the purpose of preparing financial statements that are in line with the relevant accounting standards.
  • The Board should maintain adequate records of all its meetings
Senior Management Role and Responsibility
  • The senior management bears the general executive responsibility for the day-to-day conduct of business and affairs of the institution.
  • The senior management should exercise adequate oversight of the institution’s group-wide operations, in case of overseas operations.
Reporting to the MAS
  • The Board and senior management should notify the MAS in advance of any substantive changes in the institution’s business activities, structure and overall condition, or as soon as they become aware of any material adverse developments, including breach of legal or prudential requirements.
  • The MAS should also be notified of material information that may negatively affect:
  1. The suitability of a relevant shareholder
  2. The fitness and propriety of a Board member or a member of the senior management
  • The Board is responsible for overseeing the risk governance in the institution.
  • The Board and senior management should understand the institution’s business strategy, nature of the business activities, new products, material modifications to existing products, and major management initiatives and their associated risks.
  • Senior management should provide the Board with information on all potentially material risks facing the institution, including those relevant to the institution’s risk profile, capital and liquidity needs
  • Information should be comprehensive, accurate, complete and timely.
Risk Culture and Risk Appetite
  • The Board should set the tone from the top and inculcate an appropriate risk culture throughout the institution.
  • The Board should approve the risk appetite framework which should be comprehensive, actionable and consistent with the institution’s business strategy.
  • The Board should review, at least annually, the institution’s risk profile, risk tolerance and risk strategy.

Risk Management System
  • The Board should ensure that senior management establishes a risk management system for identifying, measuring, evaluating, monitoring, reporting and controlling or mitigating risks regularly.
  • Senior management should be responsible for implementing the policies and procedures for conducting the risk strategy and policies approved by the Board.
  • Senior management should ensure that the institution has effective risk management and control processes, reliable risk measurement and reporting systems, and competent staff for sound risk management.
  • Depending on the scale, nature and complexity of the institution’s activities, the Board may appoint a chief risk officer (CRO).
  • The Board should approve the appointment, remuneration, resignation or dismissal of the CRO.
Adequate Capital and Liquidity
It is the responsibility of the Board to oversee that senior management has in place processes to ensure that the institution maintains adequate levels of capital and liquidity to support the risk exposures that may arise from its business activities.
Periodic Review of Risk Management Framework
  • The Board should obtain a periodic independent assessment of the design and effectiveness of the institution’s risk governance framework.
  • The Board should, at least annually, review the adequacy and effectiveness of the institution’s risk management and internal control systems, including financial, operational, compliance, internal audit and information technology controls.
  • Senior management should review periodically the adequacy and appropriateness of the institution's policies and procedures, and risk management processes
Stress Testing
The Board and senior management should be actively involved in the formulation and review of the institution’s stress testing programs.
Business Continuity
Senior management should ensure that business continuity and other appropriate contingency plans to deal with disruptions and stress conditions, have been prepared.

Delegation of Responsibility
While senior management might typically delegate some of its risk management responsibilities to other committees or personnel, its accountability cannot be delegated.
Additional Resources

Read the Singapore Risk Management Guidelines for Board and Senior Management in full here.

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