Proposals to undertake derivatives activities should include, as applicable: Before engaging in derivatives activities, management should ensure that all appropriate approvals are obtained and that adequate operational procedures and risk control systems are in place. This responsibility includes ensuring that there are clear delineations of lines of responsibility for managing risk, adequate systems for measuring risk, appropriately structured limits on risk taking, effective internal controls and a comprehensive risk-reporting process.Ĥ. Senior management should be responsible for ensuring that there are adequate policies and procedures for conducting derivatives operations on both a long-range and day-to-day basis.
The board of directors should also conduct and encourage discussions between its members and senior management, as well as between senior management and others in the institution, regarding the institution's risk management process and risk exposure.ģ. Accordingly, the board should be informed regularly of the risk exposure of the institution and should regularly re-evaluate significant risk management policies and procedures with special emphasis placed on those defining the institution's risk tolerance regarding these activities.
These policies, which should include those related to derivatives activities, should be consistent with the organisation's broader business strategies, capital strength, management expertise and overall willingness to take risk. The board of directors should approve all significant policies relating to the management of risks throughout the institution. Individuals involved in derivatives activities should be fully aware of all policies and procedures that relate to their specific duties.Ģ. At a minimum these policies should identify the risk tolerances of the board of directors and should clearly delineate lines of authority and responsibility for managing the risk of these activities. As is standard practice for most banking activities, an institution should maintain written policies and procedures that clearly outline its risk management guidance for derivatives activities. Risk Management Guidelines for Derivativesġ. Risk Management Guidelines for Derivativ. Oversight of the risk management processĬommittees at the Bank for International.
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