ECCB 2017-2018 Annual Report and Statement of Accounts

124 ECCB ANNUAL REPORT 2017/2018 Eastern Caribbean Central Bank Notes to the Financial Statements March 31, 2018 (expressed in Eastern Caribbean dollars) (expressed in Eastern Caribbean dollars) 3. Financial risk management …continued h) Operational risk …continued

EASTERN CARIBBEAN CENTRAL BANK NOTES TO THE FINANCIAL STATEMENTS

March 31, 2018

Managing operational risk in the Bank is seen as an integral part of day-to-day operations and management, which includes explicit consideration of both the opportunities and the risks of all business activities. The Bank’s objective is to manage operational risk so as to balance an avoidance of financial losses and damage to the Bank’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to the management team of each department. This responsibility is supported by bank-wide corporate policies which describe the standard of conduct required of staff and specific internal control systems designed around the particular characteristics of various Bank activities. Compliance with corporate policies and departmental control systems are managed by: - Requirements for appropriate segregation of duties, including the independent authorisation of transactions; - Requirements for the reconciliation and monitoring of transactions; - Compliance with regulatory and other legal requirements; - Documentation of controls and procedures; - Requirements for the periodic assessment of operational risks faced, and the adequacy of the controls and procedures to assess the risks identified; - Development and periodic testing of contingency plans; - Training and professional development; - Ethical and business standards; - Risk mitigation, including insurance where it is effective; - Weekly reporting to the senior management/risk management committee; - Quarterly management affirmation by each department’s surveillance officer that corporate policies and departmental internal control systems have been complied with; and - A structured induction program for new employees. Compliance with the Bank’s standards is supported by a programme of periodic reviews undertaken by the Internal Audit Department. The results of the reviews are discussed with the management of the department to which they relate and summaries are submitted to the Board Audit and Risk Committee and Executive Committee of the Bank.