Risk management

Overall responsibility for risk management lies with the Board of Management of Österreichische Volksbanken-AG, which decides on the fundamental risk management processes to be applied. The Board of Management also defines the basic risk policy position of Österreichische Volksbanken-AG Group, which in turn is the basis for all decisions regarding banking operations.

This basic position with respect to risk policy is reflected in procedural rules on the management of risk by Österreichische Volksbanken-AG Group and is documented in the risk strategy formulated by the Board of Management. A broadly shared understanding of the basic principles of risk policy throughout the Group is the foundation for establishing a coherent awareness of risk and a consistent risk culture. The management and all employees of Österreichische Volksbanken-AG Group are therefore obligated to comply with the basic risk policy principles and to make their decisions in accordance with the specified guidelines.

The Chief Risk Officer (CRO) is a member of the Board of Management. He is responsible – both in organisational and technical terms – for strategic risk management, operational risk management and Group risk management. In this function, the CRO regularly informs the entire Board of Management and the Supervisory Board on the risk position of Österreichische Volksbanken-AG Group.

The duties, competencies and responsibilities that make up the risk management process are clearly defined and specified. This ensures that risk-bearing organisational units (front office) are kept functionally separate from those organisational units that are responsible for the  monitoring and communication of risks (mid office). The organisational structure guarantees the separation of front and mid office functions that is required for regulatory purposes.

The quantification of risk and of capital for risk coverage as well as the management of risk is performed centrally by the strategic risk management organisational unit and its sub-units which are independent of front office units. The strategic risk management unit is responsible for the development and implementation of risk management processes for all risk types across the Group.

The subsidiaries of Österreichische Volksbanken-AG are actively involved in the ongoing development of methods and processes in the risk management system. This makes it possible to establish a common understanding of risk and efficiently utilise existing expertise within the Group at an early stage in the process, while also providing a foundation for consistent risk measurement and controls within Österreichische Volksbanken-AG Group.

VBAG Group´s risk management activities have been influenced by the economic and financial crisis. The activities focus on a continuous optimisation of methods and content of risk management processes. The extension of risk policy guidelines, new risk committees and newly regulated credit processes help to speed up and further improve the decision-making process.

These activities are supported by additional quality assurance processes that ensure data quality in the long term and can also be used as basis for RWA optimisation measures. Mapping of transactions relevant to credit risk in IT systems has been improved with regard to minimising RWA. At the same time, the Basel II computation module was calibrated in coordination with the Austrian Supervisory Authority to optimise RWA.

The measurement, limiting and management of credit risks were improved considerably through the use of an internally developed credit portfolio model. Credit risk on the basis of credit value at risk now supplements regular risk reporting. The process of compiling a monthly credit risk report was further accelerated and enhanced to include new data.

The model used since 2009 to quantify credit spread risk was developed into a two-phase model that allows risk-sensitive limiting and rounds off the limit system for this area.
In terms of structural liquidity risk management, current developments on the financial market as well as heightened regulatory requirements led to the implementation of new methods and models, the definition of key rate indicators, and the development of a limit system.

Stress testing remains a focal point. The method used to execute total bank risk stress tests was further refined and implemented within the organisation by working groups with participants from front office and risk management units.