ICICI Bank 2003 Annual Report Download - page 28

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26
RISK MANAGEMENT
Risk is an integral part of the banking business and ICICI Bank aims at the delivery of superior
shareholder value by achieving an appropriate trade-off between risk and returns. ICICI Bank
is exposed to various risks, including credit risk, market risk and operational risk. Our risk
management strategy is based on a clear understanding of various risks, disciplined risk-
assessment and measurement procedures and continuous monitoring. The policies and
procedures established for this purpose are continuously benchmarked with international
best practices. The risk management function at ICICI Bank is supported by a comprehensive
range of quantitative and modelling tools developed by a dedicated risk analytics team.
The Risk, Compliance & Audit Group (RCAG) is responsible for assessment, management and
mitigation of risk in ICICI Bank. This group, forming a part of the Corporate Centre, is
completely independent of all business operations and is accountable to the Risk and Audit
Committees of the Board of Directors. RCAG is organized into six sub-groups: Credit Risk
Management Group, Market Risk Group, Credit Policies Group, Internal Audit Group, Retail
Risk Group and Risk Analytics Group.
Credit Risk
Credit risk is the risk that a borrower is unable to meet its financial obligations to the lender.
ICICI Bank measures, monitors and manages credit risk for each borrower and also at the
portfolio level. ICICI Bank has a standardized credit approval process, which includes a well-
established procedure of comprehensive credit appraisal and rating. ICICI Bank has developed
internal credit rating methodologies for rating obligors as well as for products/ facilities. The
rating factors in quantitative and qualitative issues and credit enhancement features specific
to the transaction. The rating serves as a key input in the sanction as well as post-sanction
credit processes. Credit rating, as a concept, has been well internalised within the Bank. The
rating for every borrower is reviewed at least annually and for higher risk credits and large
exposures at shorter intervals. Sector knowledge has been institutionalized across ICICI Bank
through the availability of sector-specific information on the Intranet. Industry knowledge is
constantly updated through field visits, interactions with clients, regulatory bodies and industry
experts. In respect of the retail credit business, ICICI Bank has a system of centralized
approval of all products and policies and monitoring of the retail portfolio. We continuously
refine our retail credit parameters based on portfolio analytics.