CIM FINANCE. INTEGRATED REPORT 2022 | 65 2. MATERIAL RISK TYPES TheGroup is exposed to a variety of continually changing risks that have the potential to affect our business and financial condition. Thematerial risks, together with other significant and emerging risks facing theGroup and key controls andmitigating considerations, are summarised in the table below. MAIN RISK TYPE GOVERNANCE KEY CONTROLS & RISK MITIGATION CREDIT RISK Credit risk is the risk of financial loss if a customer or counterparty fails to meet a contractual obligation. The risk arises principally from direct lending via our various core products such as consumer finance, leasing, factoring and credit card activities. Governing Policies • Credit risk policy Key Board / Management Committees • Debtors Monitoring Committee • Portfolio & Credit Risk Forum • Risk Analytics Forum • Management Credit Committee • Risk Management Committee • Credit risk policies, standards, prudential limits including credit risk indicators. • Regular independent monitoring and reporting of credit quality, concentration, arrears, policy exceptions and breaches by the Risk Management Team. • Monitoring of performance of the credit scorecards and policy rules in credit decisioning tools. • The Debtors Monitoring Committee and the Risk Analytics Forum regularly meet to review the exposures and any early warning signs, and recommend appropriate treatment strategies. • Helping impaired customers or those at risk of becoming so by providing support measures where appropriate and working closely with them. • Risk-based approach to credit decision-making, with higher risk applications or complex applications being referred to a higher credit approval authority. • Appropriate pricing for risks. • Taking collateral where appropriate. • Enhancement to IFRS 9 ECL models, and reviews of the system, processes and controls. LIQUIDITY AND FUNDING RISK Liquidity risk arises from differences in timing between cash inflows and outflows. Governing Policies • Treasury Policy Key Board / Management Committees • Asset and Liability Committee • Risk Management Committee • Approval of policy and prudential limits by the Board. • Funding strategy approved by the Board. • Maintenance of a diverse yet stable pool of potential funding. • Maintenance of sufficient liquidity buffers. • Contingency Funding Plan and Recovery Plan in place.
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