RISK OVERSIGHT COMMITTEE CHARTER
I. GENERAL PURPOSE AND AUTHORITY
The Risk Oversight Committee has been established by the Board of Trustees to assist the Board in the development and oversight of the risk management program. In performing its duties, the Committee will maintain effective working relationship with the Board of Trustees and Management.
The Committee shall likewise assist the Board to:
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- oversee the risk profile and the risk management framework and in formulating policies and procedures relative thereto;
- assess the magnitude (impact) and likelihood of these identified risks occurring;
- ensure that a proper risk assessment is carried out and that key risks are being managed and monitored effectively;
- ensure compliance with the provisions of the Anti-Money Laundering Act (AMLA), the Anti-Terrorism Act (R.A. No. 11479) and its Implementing Rules and Regulations and other laws, rules and regulations promulgated by the AMLC and the BSP applicable to the Association’s Money Laundering and Terrorism Financing Prevention Program (MTPP);
- ensure that the incentives created by the remuneration system developed by the Board is aligned with the Association’s operating and risk culture, interest and objectives;
- provide an open avenue of communication and collaboration with Management to effectively manage risks;
- ensure that risk management is communicated across PSSLAI and that a common understanding of the risk management practice is maintained; and
- identify emerging risk issues.
Likewise, the Risk Oversight Committee shall have the authority from the Board to:
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- consult and communicate with Management about risk considerations and relevant measures to mitigate risk;
- seek and inspect corporate records, reports and any information it requires from employees and external parties;
- obtain outside legal, accounting or other professional consultancy assistance at the Association’s expense; and
- investigate any activity within its terms of reference.
II. COMPOSITION
- The Risk Oversight Committee shall consist of at least three (3) members from the Board of Trustees majority of whom shall be independent trustees, including the Chairperson, to be nominated and appointed every three (3) years, or may be reorganized as deemed necessary by the Board of Trustees.
- The Chairperson of the Committee or any of its Members may be removed from office only by the Board. Should any vacancy arise, the Board shall appoint a new Member in order to meet the required composition of the Committee.
- The Corporate Secretary shall be the Secretary of the Committee.
- The Committee may also invite Resource Person/s from the Management and employees or external consultants who shall act as subject matter experts (SME) and provide comprehensive and reliable information required by the Committee to be used for deliberation and decision-making.
III. QUALIFICATIONS
- The Members of the Committee who are Trustees shall possess the same qualifications and none of the disqualifications of a Trustee, as prescribed by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP). In addition, they must possess the following qualifications set by the Board of Trustees:
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- Must have a Masteral Degree preferably in the fields of Accounting, Management, Business Administration, Finance or its equivalent;
- Must have adequate knowledge of risk management framework and practices;
- Must be a graduate of the Professional Director’s Program of the Institute of Corporate Directors or its equivalent Program Providers accredited by BSP/SEC;
- Must have good leadership experience at a strategic or policy making level in a corporate, government or non-profit organization;
- Must be able to demonstrate financial, legal and business literacy through previous experiences;
- Must have demonstrated that they have sufficient time and availability to satisfy the Trustee’s responsibilities;
- Must have a reputation for ethical behaviour both personally and professionally; and
- Must be free from any conflict of interest that may impair the Trustee’s ability to make consistent and fair decisions in the best interests of the Association.
- In addition to the mandatory qualifications, a Trustee must demonstrate the following set of skills and personality traits:
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- INTEGRITY – must be able to act in a manner that will sustain and improve trust to reinforce the Association’s reputation and brand.
- KNOWLEDGE OF GOVERNANCE – must have the experience as a leader in any organization of similar interests or strategic level with track record of preparing for and contributing to meetings, discussions and oversight in a lead role. Further, he must have the ability to readily distinguish between governance and operational matters as well as better understanding of risk management.
- COLLABORATIVE SKILLS – must be able to demonstrate ability to perform effectively as part of a team of the Board to help achieve expected Board performance. This includes effective negotiation skills, ability and willingness to build consensus, strong conflict management skills and willingness to accept and support Board decisions.
- COMMUNICATIONS – must have the ability to convey information during Board meetings effectively and efficiently by justifying viewpoints with logic, facts and figures as well as by listening effectively.
- BUSINESS ACUMEN – must have the experience in dealing with general business matters or understanding of complex business situations.
- INDEPENDENCE – must have sense of impartiality and freedom from influence by any factors other than the interest of the members of the Association.
- KNOWLEDGE ON LEGISLATION AND STANDARDS – must be familiar with relevant legislations, policies and standards applicable to Savings and Loan Industry.
- The members of the Committee shall be provided with necessary professional education/training relevant to the operations of the Association, including the annual continuing training on relevant topics of at least eight (8) hours.
- All members of the Risk Oversight Committee shall have an adequate understanding of issues related to the Association’s risk exposures and the business environment in which the Association operates. Committee members shall likewise have a working familiarity with risk management principles and practices and capable of making valuable contributions to the Committee.
- Any member of the Committee who has been absent or who has not participated, for whatever reason, in more than fifty percent (50%) of all meetings cumulatively during a given period, both regular and special, shall be removed for cause and disqualified for reappointment in the succeeding election, except that if the Chairman certifies that said member was given the agenda for the meeting and their comments/discussions thereon were taken up in the meeting, said member shall be considered present in the meeting. This disqualification applies only for purposes of the immediately succeeding election.
VI. MEETINGS
- The Committee shall hold a regular meeting once a month at least one (1) week prior to the Board Meeting. The Committee Chairperson may call for one (1) special meeting a month as may be necessary.
- The Chairperson shall preside at each meeting, and in his absence, another member of the Committee shall be designated as acting chair.
- A quorum shall comprise of majority of the Members of the Committee. Voting on Committee matters shall be on one member – one vote basis. Majority vote of all Members present shall constitute an official action of the Committee.
- The Members of the Committee shall attend its meetings in person or through teleconferencing and videoconferencing conducted in accordance with the rules and regulations of the SEC in such a manner that will allow the Member who is taking part in said meetings to actively take part in the deliberations on matters taken up therein, except when justifiable causes prevent his attendance to ensure that the quorum requirement will be met.
- The Chairperson shall direct the Secretary to prepare the agenda and related background information for each meeting. The agenda shall be reviewed and approved by the Chairperson prior to distribution. Members must receive the detailed Agenda along with briefing and/or background materials at least one week before the scheduled meeting. Any member may recommend or suggest topics that may be discussed by the Committee.
- The Risk Management Committee may invite any officer, employee or any external party with competence/expertise or knowhow on risk management to attend its meeting as it deems necessary. To maximize effectiveness and support an atmosphere that allows honest discussion of sensitive matters, the Committee must limit attendance to those who can make contribution to agenda topics.
- The Secretary should attend and record all meetings. The minutes of the meeting shall be signed by the Secretary and circulated to all members of the Committee and other personnel as directed by the Chairperson.
- The Secretary shall be responsible for the safe-keeping and circulation of the minutes of the meetings to the Committee members. The Secretary shall keep a systematic record of Minutes of the meetings, briefing packages and other relevant document related to the Agenda discussed and approved.
- Matters taken up in meetings of the Committee shall be reported to the Board of Trustees at its next regular meeting.
- The Committee must also conduct consultations throughout the year to provide the Chairperson with better insights into the issues the Association is dealing with, as well as enable a stronger rapport between the Chairperson and the risk management team.
- The Committee shall ensure that follow-up actions during previous committee meetings are properly addressed and monitored.
V. DUTIES AND RESPONSIBILITIES
The basic responsibility of the members of the Committee is to exercise sound business judgment in accordance with the best practices of good corporate governance in the interest of the Association.
The Committee shall have the following core responsibilities:
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- IDENTIFY AND EVALUATE EXPOSURES – The Committee shall assess the probability of each risk becoming reality and shall estimate its possible effect and cost. Priority areas of concern are those risks that are the most likely to occur and are costly when they happen.
- DEVELOP RISK MANAGEMENT STRATEGIES – The Committee shall develop a written plan defining the strategies for managing and controlling the major risks. It shall identify practical strategies to reduce the chance of harm and failure or minimize losses if the risks become real.
- EXECUTE AND MONITOR THE RISK MANAGEMENT PLAN – The Committee shall communicate the risk management plan and loss control procedures to affected parties. The Committee shall conduct regular discussions on the Association’s current risk exposure based on regular management reports and direct concerned units or offices on how to reduce these risks.
- REVIEW AND REVISE THE PLAN AS NEEDED – The Committee shall evaluate the risk management plan to ensure its continued relevancy, comprehensiveness, and effectiveness. It shall revisit strategies, look for emerging or changing exposures, and stay abreast of developments that affect the likelihood of harm or loss. The Committee shall report regularly to the Board of Trustees the entity’s over-all risk exposure, actions taken to reduce the risks, and recommend further actions or plans as necessary.
Hereunder are the specific duties and responsibilities of the Risk Management Committee:
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- Ensure that appropriate risk management system is in place to identify, assess, manage, monitor, review and report risks.
- Define the Associations’ risk appetite statement which will be presented to the Board for approval.
- Conduct annual review of the risk appetite for validity and recommend changes as necessary.
- Oversee the Association’s compliance with the AMLA through regular reporting by the Compliance Department.
- Regularly check all ML/TF updates, including Association’s compliance with KYM requirements, risk profiling, monitoring of members’ accounts and transactions, CT and ST reporting, and any other relevant updates on ML/TF risks.
- Determine effectiveness of the risk management practices related to Money Laundering and Terrorist Financing prevention, Risk Assessment, AML Monitoring System, Risk-based and tiered customer identification and updating of records, and Compliance Testing and report the same to the Board of Trustees.
- Review the incentives created by the remuneration system to ensure that risk, capital and the likelihood and timing of earnings have been considered in its development.
- Review the remuneration and other incentives policy as well as its implementation and the processes involved and ensure that these are aligned with the Association’s objectives.
- Require reports from Management about information on risk exposures and risk management activities
- Ensure that the employment and/or separation of the Chief Risk Officer shall be upon the recommendation of the Risk Oversight Committee to the Board.
- Oversee the mandate of the Chief Risk Officer.
- Review and recommend to the Board the Management’s proposed aggregate loss limit targets for various risk categories and ensure that whenever limits are breached, immediate actions to correct them are taken.
- Review and recommend risk measurement methodology and assumptions.
- Monitor the Association’s preparations and implementation of industry requirements with respect to risk management issues.
VI. REPORTING
Every regular Board meeting, the Risk Oversight Committee shall update the Board of Trustees about the activities of the Committee and make appropriate recommendations on any significant impact on the risk conditions of the Association.
VII. CHARTER AMENDMENTS
The Committee shall from time to time assess the adequacy of this Charter and approve, review and update at least annually or whenever there are significant changes in this Charter and recommend changes hereto to the Board.
Any amendment to this Committee Charter shall be approved by the Board of Trustees.