• Sustainable growth in the credit portfolio. The credit profile is consistently on an improving trend and is on track to return to a level similar to pre-COVID 19 norms. • ECL is on the declining trend, reflecting the positive trends in portfolio performance alongside a related net release of judgmental post-model adjustments. • ECL models have been updated with the latest dataset in 2023 to consider the most recent performance and latest macroeconomic forward-looking variables. • We continued to closely monitor the performance of the portfolio and with respect to the credit scorecards and credit policies. • We adjusted our Credit Decision Policy rules during the year to further improve the risk profile. • Sector appetite was reviewed for those sectors with increasing risk, whereas for some sectors and business segments with consistent improvement in performance, the appetite was prudently increased. Governance The Credit Risk function is independent of the Business Units and provides oversight and challenge of the Business Unit’s credit risk management activities. Governance activities include: • Oversight of the first line of defense to ensure that credit risk remains within the appetite set by the Board, and that controls are being operated adequately and effectively. • Defining the credit risk appetite measures for the management of concentration risk, recommending changes to credit policies and enhancement in controls that must be in place to mitigate credit risk. • Assessing and recommending the ECL provisions, including the key IFRS 9 inputs and any necessary in-model and post-model adjustment provisions. Material changes to the ECL Standard and to the models are reviewed and approved by the Risk Management Committee. • Independent monitoring and reporting of the performance of credit scorecards and risk profile of the portfolio. Credit risk management principles CFSL has an established credit risk management framework, which incorporates governing principles that are defined in a series of credit-related policies and standards. The same are further supported by more specific processes and operating procedures applying to each lending segment. The objective of CFSL’s credit risk management framework is to ensure all material credit risks to which the Group is exposed are identified, measured, managed, monitored, mitigated and reported on a consistent basis. This requires careful consideration of proposed extensions of credit, the setting of specific limits, monitoring during the life of the exposure, active use of credit mitigation tools and a disciplined approach to recognising credit impairment. CFSL’s credit processes are designed with the aim of combining an appropriate level of authority in its credit approval processes with timely and responsible decisionmaking and customer services. Within the powers to act granted by the Board of Directors, credits are approved by decision-making authorities at different levels of the organisation, depending on the riskiness and the credit exposure of the customer. For consumer finance products, the Company has a robust credit scorecard and Policy rules integrated in the credit decision-automated engine. The performance of the scorecard and the Policy rules are regularly reviewed by an independent team to ensure any elevated risks are promptly addressed. The Credit Underwriting team focuses on exceptions and higher risk cases, where necessary, feeding back into the decisioning framework. The risk management function is responsible for the independent oversight of credit risk and for overall risk reporting to the Risk Management Committee and the Board on developments in credit risk and compliance with specific risk policies and limits. Large credit risk exposures are subject to regular monitoring through the Debtors Monitoring Committee on a periodic basis for closer attention and action to be taken, when appropriate. KEY DEVELOPMENTS IN 2022/2023 Risk Management Report Continued 70 CIM FINANCE ANNUAL REPORT
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