Interest Rate Risk

Board Oversight
Effective oversight by a bank’s board of directors and senior management is critical to a sound IRR management process. Aside from senior management, the board of directors is responsible for overseeing the establishment, approval, implementation, and annual review of IRR management strategies, policies, procedures, and risk limits. Provide management with sufficient resources to measure, monitor, and control IRR is one of the important role to be focus on. The board should monitor the performance and IRR profile of the organization, make sure the information is timely and efficient be received by director in order to helping them to understand and assess the interest-rate risk to facing the organization portfolio and organization as a whole. In addition, the board should periodically make review interest-rate risk management policies and procedures; to ensure business strategies which affected organization interest-rate risk exposure is well executed. Besides that, board of directors should discuss organization about interest-rate risk exposure and management process within its board members and senior management. They want to ensure companies who have personnel available for technical skills and want senior management fully understand and is can controlling the risk incurred by the organization. Hence, senior management is playing an important role at this field.

Senior Management Oversight

Senior management is responsible for ensuring that the organization has adequate policies and procedures for managing IRR on both a long range and day-to-day basis and that clear lines of authority and responsibility are maintained for managing and controlling this risk. Aggregate information with sufficient details of interest-rate risk reports can help senior management to enables them to access the impact of market rates changes and impact of key assumption in interest-rate risk model, and understand other important risk factors. Senior management must periodically re-evaluate the interest-rate risk management policy and procedures make sure it is under controlling and appropriate going. Management is also responsible for maintaining adequate systems and standards for measuring risk and standards for valuing positions and measuring performance. Senior management should always keep in touch with boards members make sure the size and complexity of organization is appropriate going.