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1. Credit Risk

2. Liquidity Risk

3. Market Risk
Security gap:
= Total Asset (<12 months) Liability (12 months)
= (396 070) + (1 723 665) + 375 665
= (RM 1 744 070)

4. Operational

Credit Risk

Credit risk is defined as the risk of potential losses arising from a customer default or
deterioration of the credit standing of a customer with whom the Bank has entered
transactions into.
The percentages of credit risk is only 1.17% compared to 2012, which is 1.74%. It is
much lower and the lower is the better. Then, the company need not to worry much on
this risk because the decreasing in this credit risk showed that the management of
credit risk is good.
To manage this risk, the Bank establishes policies and procedures for credit
origination, scoring, rating, approval, monitoring, collection and recovery. Credit
approval authorities are delegated to committees and individuals in accordance to the
risk appetite of the Board. Regular analysis and reporting of risk profile covering
credit exposure, movements of non-performing financings ("NPFs"), concentration of
credit exposure, adequacy of specific provision for NPFs and capital adequacy is
updated to the Management, the Risk Management Committee and the Board.
Liquidity Risk
Liquidity risk relates to the ability of the Group and of the Bank to maintain sufficient
liquid assets to meet financial commitments and obligations when they fall due at a
reasonable cost. This type of risk is to calculate the short-term asset whether it can
cover the short term financing or not.
The result shows that liquidity risk is only around 24%. As long as it did not reach
40%, then there are not so many financing ratio used for the short term used. So, in
order to manage any issues regarding the liquidity risk, Al-Rajhi Bank has introduced
some processes includes maintaining liabilities of appropriate term relative to the
asset base. In order to avoid undue reliance on large individual depositors and ensure
satisfactory overall funding mix, they monitor their depositor concentration.
Apart from that, the bank should have a sound process for identifying, measuring,
monitoring and controlling liquidity risk. The process should include a robust

framework so that they can comprehensively projecting cash flow that are arise from
the assets, liabilities and off-balance sheet items over an appropriate set of time
Market Risk
Market risk is defined as the risk that could incur losses due to changes in the value of
assets and liabilities (including off-balance sheet items) caused by fluctuations in the
market risk factors such as profit rates and foreign exchange rates. Meanwhile,
liquidity risk is defined as the risk of losses arising from funding difficulties to raise
the necessary funds, or when it is forced to obtain funds at much higher rates than
In order to manage this type of risk, the Bank establishes policies and procedures for
monitoring, reporting and control of market and liquidity risks including setting
appropriate management trigger and exposure limits and performing regular stress
testing. The Asset and Liability Committee (ALCO) is established to monitor,
deliberate and make decision on matters related to funding, liquidity as well as asset
and liability mismatch risks management. The Bank manages its liquidity in
compliance to BNMs New Liquidity Framework. Regular analysis and reporting of
market and liquidity risks profile is updated to the Management, the Risk
Management Committee and the Board.
Operational Risk
Operational risk is defined as the risk of loss, whether direct or indirect, to which the
Bank is exposed due to inadequacy or failure of processes, procedures, systems or
controls and external events. Operational risk, in some form, exists in each of the
Banks business and support activities and can result in direct and indirect financial
loss, regulatory sanctions, customer dissatisfaction and damage to the Banks

For the year of 2013, the percentage of operational risk is 5.3%. It shows that from the
entire total financing in this company, only 5.3% has been use to cover the operational
finance. The lower the percentage, the better for the company.
The management of operational risk is an important priority for the Bank. To mitigate
such operational risks, the Bank has developed an operational risk program and
essential methodologies that enables identification, measurement, monitoring and
reporting of inherent and emerging operational risks.