The
Bank
uses
tools
that
analyse
and
quantifies
environmental,
social
and
corporate
governance
risks
at
the
industry
level
based
on
a
standardized
set
of
criteria.
This
assessment
is
a
mandatory
part
of
the
lending
process,
allowing
the
conscious
building
of
exposure
and
monitoring
the
ESG
profile
of
the
corporate
portfolio and better determining directions in the clients' transformation.
Social risk (S)
Social
risk,
included
in
ESG
risk,
is
the
risk
of
negative,
including
financial,
consequences
caused
by
the
actions
of
the
Bank
or
its
employees
that
violate
the
norms
and
rules
of
social
relations
between
the
Bank's
employees,
the
Bank's
relations
with
its
counterparties,
legal
entities
with
which
the
Bank
cooperates
or
customers.
Within the framework of social risks, the following aspects can be distinguished:
■
cyber threats, hacking attacks on both the Bank's systems and its customers,
■
consequences
resulting
from
violations
of
human
rights
(including
violations
of
labour
rights,
rights
or freedoms of individuals in terms of personal data protection, bullying, discrimination),
■
disputes with the Bank's customers,
■
handling controversial areas and industries,
■
customer expectations that do not arise directly from contractual relationships or laws,
■
public expectations of the Bank as a public trust institution that the Bank cannot meet,
■
complicated
and
complex
offerings
of
the
Bank
that
may
create
misunderstanding
on
the
part
of
customers,
■
social impact of natural disasters and pandemics.
Governance risk (G)
Governance
risk
is
the
risk
of
negative
consequences
in
the
financial
and
non-financial
areas
caused
by
the
bank’s
violation
of
the
principles
of
corporate
governance,
broadly
defined,
arising
from
external
and
internal regulations.
Governance risk may include:
■
operational
risk
–
in
light
of
governance
risk
within
operational
risk,
legal
risk,
conduct
risk,
risk
of
money
laundering,
terrorist
financing
and
violation
of
sanctions,
cyber
risk
and
tax
risk
are
particularly relevant,
■
compliance risk – resulting in the bank’s failure to timely comply with new regulations,
■
reputational
risk
–
the
occurrence
of
this
type
of
risk
can
materialize
through
the
occurrence
of events that affect the Bank’s stakeholders’ perception of the Bank.
For
effective
management
of
governance
risk,
the
Bank
ensures
that
its
operations
comply
with
a transparent
system
of
internal
regulations,
in
accordance
with
the
Internal
Governance
Policy.
In managing
this
risk
the
Bank
also
ensures
universal
and
equal
access
to
information
and
makes
effort
to
ensure
that
the
information
made
available
is
up-to-date,
reliable
and
presented
in
a
transparent
way
for
key stakeholders, in accordance with the adopted Information Policy.
As
part
of
the
Internal
Governance
Policy,
the
individual
areas
that
make
up
internal
governance
are
reviewed
annually.
On
the
basis
of
the
review,
the
Bank's
Management
Board
and
then
the
Supervisory
Board
assess
the
adequacy
and
effectiveness
of
internal
governance
in
conjunction
with
the
evaluation
of
the
internal
control
system
and
the
assessment
of
the
application
of
corporate
governance
principles.
As
part
of
the
assessment,
possible
improvement
actions
are
identified
to
ensure
the
highest
standards
of
management and maintenance of corporate governance.
3.18.
Fair value of assets and liabilities
Fair
value
is
the
price
that
would
be
received
from
the
sale
of
asset
or
paid
to
transfer
a
liability
in
an
ordinary
transaction
between
market
participants
at
the
measurement
date.
A
fair
value
measurement
assumes that the transaction of selling the asset or transferring a liability occurs:
■
on the main market for the asset or liability,
■
in the absence of a main market, for the most advantageous market for the asset or liability.
In
line
with
IFRS
9,
for
accounting
purposes,
the
Bank
determines
the
valuation
of
its
assets
and
liabilities
through
amortised
cost
or
through
fair
value.
In
addition,
for
the
positions
that
are
valued
through
amortised cost, fair value is calculated, but only for disclosure purposes – according to IFRS 7.
The
approach
to
the
method
used
for
the
loans
that
are
fair
valued
in
line
of
IFRS
9
requirements,
is described in the point 3.3.7.
Following
market
practices
the
Bank
values
open
positions
in
financial
instruments
using
either
the
mark-to-market
approach
or
is
applying
pricing
models
well
established
in
market
practice
(mark-to-model
method)
which
use
as
inputs
market
prices
or
market
parameters,
and
in
few
cases,
parameters
estimated
