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Support Functions
Information Technology (IT)
Modern day banking is IT driven and the
Bank's focus would be to constantly upgrade its IT platform to be
'state-of-the-art'. The IT function of the Bank thus assumes significant
importance and is committed to providing quality service to its customers backed
by the latest technology and convenient delivery channels. During 2002 many of
the IT initiatives were towards this
end and included the introduction of Internet banking, Kiosk Banking and Channel
Manager among others. IT is currently involved in major projects which would
further enhance the quality of services to the customers.
Human Resources (HR)
The major initiative of HR during 2002 was to re-engineer the business processes
in line with the emerging best practices. The objective of the
re-engineering was to enable staff to directly interact with the HR department
in a paperless environment and improve the response time in addressing HR issues
and staff matters. HR continually reviews the HR policies with a view to making
amendments in line with the best practices. HR is currently involved in
implementing the Human Resources Management Software (HRMS), which would enhance
the capabilities of the division and enable the division to carry out certain
processes like career and succession planning. The Training department continues
to support the business by providing in-house training to
its staff. Comprehensive training plans are devised for staff at all levels
covering a wide area of topics, which encompass all areas of the Bank's
operations. The Bank was rated as the best place to work in the Sultanate of
Oman in a recent survey sponsored by Business Today Magazine among 32 leading
organizations. This has been possible due to the teamwork, dedication and
commitment of our employees and ongoing initiatives planned for staff who are
highly motivated to achieve the ambitious goals set by the Bank. The Bank has
been able to achieve its Omanisation commitments and Omanisation issues continue
to be top priority, given the national objectives in this regard. The
Omanisation percentage for the Bank as at December 31, 2002 stood at 90%.
Finance
The Finance division of the Bank aids Executive Management in the strategic
planning and decision-making processes by providing vital information and
in-depth analysis. The Bank uses state-of-the-art profitability module software
for in-depth analysis of the profit contribution from business lines, products
and customers. The profitability modules enable the Bank to make sound business
decisions based on a thorough understanding of the profitability dynamics of the
Bank. This helps the Bank to identify and focus on key business lines and
assists the planning and expansion process in a challenging and competitive
environment. The division also plays an active role in cost management with the
objective of increasing the bottom line of the Bank and achieving the optimum
benefits of synergies from various mergers and acquisitions. The Bank
strongly believes in presenting financial statements, which are transparent and
provide adequate and meaningful disclosures to the users of the financial
statements. In line with this approach, the Bank follows the best practices in
disclosure requirements of the International Financial
Reporting Standards and regulatory authorities.
Risk Management
A robust risk management process is at the core of the Bank's activities. The
key focus of our risk management approach is to identify, measure and monitor
all the risks of the Bank in the sense of a control loop and to integrate the
information gained as a result into a risk/earning-based management system for
the Bank as a whole.
The Bank has an independent risk function
that helps define appropriate risk levels for the various business divisions of
the Bank through an enterprise-wise risk policy and regularly reviews adherence
to it. The Bank's risk policy, approved by its Board of Directors, sets
standards for risk for Corporate Credit risk, Retail Credit risk, Market risk
and operational risks. The main objective
of the risk policy is to limit the risks relating to the generation of income by
means of clearly defined limit structures, thus protecting the Bank from
unexpected burdens. Compliance with the various parameters set in the risk
policy is reviewed on a monthly/quarterly basis and variances from the norms are
reported to the Management for remedial action. The risk policy is
updated every year based on an analysis of the economic trends and the operating
environment in the countries where the Bank operates.
Credit Risk
Credit risk is the potential loss resulting from the failure of a borrower or
counter party to honour its financial or contractual obligations. Corporate
lending accounts for 65% of the total loan book of the bank. While the
day-to-day management of corporate credit and the asset quality is the
responsibility of the business line management, all medium and large corporate
proposals/renewals are reviewed by the Risk Management Department, whose
recommendations form an important input to the decision making process. Using
globally renowned risk rating software, the bank does an objective risk rating
of all its corporate borrowers based on their financial position as reflected in
their latest audited financial statements and other relevant subjective
matters as evaluated by the concerned relationship managers. Risk rating is
centralised in the Risk Management Department to provide objectivity and ensure
uniformity of the rating process.
Retail Banking portfolio is reviewed by Risk Management Department on a
portfolio basis. In conjunction with the risk policy and the appetite, the
Retail Banking division identifies and defines the portfolios of credit and
related risk exposures which it can take and the key benchmarks. Retail Banking
accounts for the remaining 35% of the Bank's loan book.
The Bank adopts a rigorous standard for identification, provisioning and
monitoring of the non-performing loans on towards an eventual recovery. As at
December 31, 2002, 79.8% of the non-performing advances have been provided for and
the remaining is
adequately covered by tangible collateral.
The risk policy ensures that the Bank's lending is targeted and distributed over
various economic sectors. The sectoral exposures (excepting personal loans),
which include both funded and non-funded for the year 2002, were within the
prescribed limit of 15% per sector.
Liquidity Risk
Liquidity risk is the potential inability of the Bank to meet its maturing
obligations to a counter party. Liquidity risk management seeks to ensure that
the Bank has the ability, under varying scenarios, to fund increases in assets
and meet maturing obligations as they arise. The treasury department of the Bank
is responsible for the liquidity management in the Bank under the guidance and
supervision of the Asset and Liability Management Committee (ALCO). The risk
policy sets liquidity limits, targets, ratios and contingency measures. The
Bank's funding sources are well diversified across funding types and countries
and include customer deposits, certificate of deposits, bonds, subordinated
loans etc. The sources and maturities of assets and liabilities are closely
monitored to avoid any undue concentration and ensure a robust management of
liquidity risks. The deposits have
had a stable profile and the top 20 depositors contributed to 30.44% of the
Bank's total deposits as at
December 31, 2002. The Bank's savings deposits grew by
45% during the year 2002 which helped diversify the deposit base and reduce the
overall cost of funds for the Bank.
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