ICICI Bank 2011 Annual Report Download - page 42

Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events. It includes legal risk but excludes strategic and reputation risks. Operational risks in the Bank are
managed through a comprehensive system of internal controls, systems and procedures to monitor transactions,
key back-up procedures and undertaking regular contingency planning. The control framework is designed based
on categorisation of all functions into front-office, comprising business groups; mid-office, comprising credit
and treasury mid-offices; back-office, comprising operations; and corporate and support functions. ICICI Bank’s
operational risk management governance and framework is defined in the Operational Risk Management Policy,
approved by the Board of Directors. While the policy provides a broad framework, detailed standard operating
procedures for operational risk management processes are established. The policy is applicable across the Bank
including overseas branches and aims to ensure clear accountability, responsibility and mitigation of operational
risk. We have constituted an Operational Risk Management Committee (ORMC) to oversee the operational risk
management in the Bank. The policy specifies the composition, roles and responsibilities of the ORMC. The
framework comprises identification and assessment of risks and controls, new products and processes approval
framework, measurement through incidents and exposure reporting, monitoring through key risk indicators and
mitigation through process and control enhancement and insurance. We have formed an independent Operational
Risk Management Group for design, implementation and enhancement of the operational risk framework and to
support business and operation groups in the operational risk management on an on-going basis.
TREASURY
Our treasury operations are structured along the balance sheet management function, the client-related corporate
markets business and the proprietary trading activity.
During fiscal 2011, financial markets remained volatile. The government bond markets witnessed increase in
benchmark yields following the emergence of inflationary concerns and the tightening monetary policy stance
which impacted our government securities portfolio. Further, since October 2010, equity markets continued to
remain volatile with the NIFTY declining by nearly 17% from October to February which offset the equity capital
gains made during the first part of the year. These factors had an adverse impact on the Bank’s proprietary trading
gains. The Bank continued to focus on the corporate bonds segment to offset this impact, and remained among
the top two arrangers according to the Prime database. In respect of primary issues for the private sector, the Bank
was ranked first in league table rankings. Over the last year, the Bank strengthened its relationship with the top 10
issuers and focused on increasing its distribution reach by adding over 300 provident fund trusts. The Bank also
increased its geographical coverage through manpower addition at key locations.
Our balance sheet management function continued to actively manage the government securities portfolio held
for compliance with SLR norms to optimise the yield on this portfolio, while maintaining an appropriate portfolio
duration given the interest rate environment.
We provide foreign exchange and derivative products and services to our customers through our Markets Group.
These products and services include foreign exchange products for hedging currency risk, foreign exchange and
interest rate derivatives like options and swaps and bullion transactions. We also hedge our own market risks
related to these products with banking counterparties.
HUMAN RESOURCES
ICICI Bank seeks to nurture a mutually beneficial relationship with its employees. This relationship is characterised
by the investment which the Bank makes in its employees by providing challenging roles and assignments,
opportunities for personal growth, relevant and timely performance support, training and an enabling environment.
The Bank seeks to create a workplace which combines achievement orientation with care for employees. On
January 5, our Founder’s Day, we formalised this employee value proposition through launch of the “Saath Aapka”
campaign. Through Saath Aapka, the Bank has clearly and in a transparent manner articulated what employees
can expect from the organisation. At the same time, the Bank has defined the desired competencies at various
Business Overview
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