CIMA concludes event on ‘Navigating Credit Risk’

“All financial services entities require a journey towards reaching full compliance over SLFRS 9 as there are significant process improvements required to fine tune the models which are implemented at the date of transition,” said Ernst & Young Principal – Financial Accounting Advisory Services Rajith Perera, ACMA, CGMA, in delivering his presentation at the member event organized by the Chartered Institute of Management Accountants (CIMA) on 18July.

The key presentation covered emerging trends in risk management and harmonisation of BASEL credit risk management with SLFRS 9 Financial Instruments equivalent to IFRS 9 and was a timely topic to discuss the challenges faced by the financial services sector.

The presentation was followed by a panel discussion moderated by LSEG TechnologyHead of Finance and Planning Priyantha Cooray, FCMA, CGMA. 

The eminent panellists at the event were Commercial Bank of Ceylon PLC Chief Risk Officer Kapila Hettihamu, Nations Trust Bank PLCChief Risk Officer Chamila Sumathiratne, ACMA, CGMA, and Hatton National Bank PLCDeputy General Manager – Risk, Chief Risk Officer/Chief Information Security Officer Damith Pallewatte, ACMA, CGMA.

The panel discussion enlightened the audience as to how the business dynamics have changed over a period of time, given that the financial services sector of the country has reported a slow growth in recent times. 

Hettihamu explained in responding to a question from the moderator that it’s incorrect to say that implementation of IFRS had an impact on weakening the credit growth. The margins had always been shrinking during the past years. Resistance to adopt new measures was nothing new. The mindset including the customer perspective, needs to be changed with the IFRS implementation, he further added.  

Sumathiratne in providing his views mentioned that there was an issue at the time of introduction of IFRS as capital requirements were also introduced on the same time. 

Pallewatte commenting on the ratings mentioned that ratings were in place for the purpose of ICAAP. Rating systems are like machines which need to be serviced from time to time. Parameters of the rating systems should be reviewed at least every 12-18 month intervals. He added that conventional risk is managed by banks for nearly 10 years however now the industry is experiencing a shift where although products are similar, the channels and features will be constantly experiencing change. 

The session covered the fundamental principles of BASEL credit risk management and expected credit loss model as per SLFRS 9 Financial Instruments. The session discussions clearly set out how financial services sector entities required to focus on credit risk management aspects including the emerging trends of credit risk management including how entities will benefit from early warning signals and how such systems can help entities to better manage their credit risk, how risk/finance functions can use data analytics to help them to make better decisions and the challenges the local financial service entities will have to face midst of various economic challenges and market volatilities. 

This session was organised by the CIMA Member Development Committee in line with celebrating member diversity in this CIMA centenary year.