We are continually improving our prudent risk management framework and integrating efficient online and offline practices to mitigate identified and anticipated risks. This safeguards our business in critical times.
Our Board oversees the Risk Management Committee, frames and reviews risk management processes and controls.
We have a comprehensive system of risk management and internal controls, whose objective is to ensure that various risks are identified, measured, and mitigated, and also that policies, procedures and standards are established to address these risks.
Our risk management system features a ‘three lines of defence’ approach:
This comprises our operational departments, which assume primary responsibility for their own risks and operate within the limits stipulated in various policies approved by the Board or by committees constituted by the Board.
This comprises specialised departments such as risk management and compliance. They employ specialised methods to identify and assess risks faced by the operational departments, and provide these departments with specialised risk management tools and methods; facilitate and monitor the implementation of effective risk management practices; develop monitoring tools for risk management, internal control and compliance; report risk-related information; and promote the adoption of appropriate risk prevention measures.
This comprises the Internal Audit department and External Audit functions. They monitor and conduct periodic evaluations of the risk management, internal control and compliance activities to ensure the adequacy of risk controls and appropriate risk governance.
The onset of COVID-19 in India triggered significant sell-off in the market and resulted in investors becoming wary of the future. At such times, risk management becomes extremely critical. Our proactive and real-time risk management, backed by the best available technology and prudent risk management framework helped us tide over the market volatility without any material impact. We entered into risk-mitigation mode in March 2020 and systematically reduced exposure to products like MTF and ESOP. We also took a cautious approach with respect to our offerings of margin-based products.
The external environment has experienced rapid transformation in terms of the range of products and their modes of delivery. Additionally, the markets have seen unprecedented volatility in the recent past due to the onset of the COVID-19 pandemic. These conditions underline the need for a robust strategic framework for risk management to ensure sustainable value creation and value protection for you.
Head, Risk Management, ICICI Securities
Risks arising from fluctuation in the value of financial instrument due to volatility in market variables such as stock prices, interest rates, currency rates, credit spreads and other asset prices. Being a financial services intermediary, our business is vulnerable to such risks, including that pertaining to our proprietary trading activities.
Our products allow clients to take leveraged positions by placing requisite upfront margins with us, which may not be sufficient to cover the losses in case of extreme volatility.
Risks arising due to investments in fixed income instruments as well as those arising out of receivables from our customers and clearing house of stock exchanges.
Risk arising on account of our capital market-related business and trading and investment activities.
Inability to effectively manage operations and come up with effective products and services may lead to losses.
Risks arising from growing competition from fintechs and non-discount brokers, evolving customer needs for technology-based servicing as well as the need to protect IT systems and processes from damage and cyber threats.
Annual Report 2019-20
