Which of the following is charged with setting policies and overseeing the performance of a bank?

The Bank is committed to entrenching best practices in Enterprise Risk Management (ERM) to achieve its vision to be “a world class modern central bank.” ERM promotes a risk-aware culture in the Bank so that all staff act with full knowledge of the implications of their decisions and actions in pursuing the mission and goals of the institution.

Risk management forms the Bank’s second line of defence towards the process of achieving its mandate and strategic objectives, and is thus a central part of the Central Bank of Kenya’s (CBK) Strategic Management. The bank units form the first line of defence, whereas Internal Audit provides the third line of defence, which is independent assurance.

Risk Management
The risk management function is charged with the following roles:
a)    Spearheading formulation of a Risk Management Policy for the Bank that clearly stipulates:
•    The objectives of the Bank’s Risk Management arrangements.
•    Structures responsible for managing risk within the Bank.
•    The Bank’s risk tolerance levels.
•    The Bank’s Risk Management frameworks that will help to identify, assess, monitor and manage potential risks and opportunities.
•    The mode of creating risk awareness within the Bank including appropriate education.
b)    Systematic assessment of risks throughout the Bank in consultation with the Departmental Heads, through interactive sessions like Control and Risk Self-Assessment (CRSA), by reviewing the Bank’s main activities and understanding how these activities can generate risks. The Function ensures that clear responsibilities and consistent frameworks are put in place to define, assess, monitor and control risk throughout the Bank, while at the same time creating risk management awareness amongst all members of staff. The main activities of the Bank which the Risk Management Function reviews on a regular basis include:
•    Monetary Policy
•    Financial System Stability
•    Banking Services
•    The Issuance of Currency
•    Foreign Reserves Management and Intervention Capacity
•    Real Time Gross Settlement System (RTGS) – KEPSS
•    National Debt Services
•    Internal support arrangements necessary for the above functions, including Procurement, Accounting, IT Services, Financial Markets Settlements, Internal Audit and Human Resources
c)    Reporting, documenting and maintaining a data base for the risks identified throughout the Bank (the Risks Register) and developing risk indicators that are used to signal possible problem areas and act as an early warning system.
d)    Assessing and documenting risk Incidence Reports in all areas of the Bank for management information.
e)    Carrying out regular risk reviews of major projects in the Bank.

Business Continuity Management (BCM)

Central Bank of Kenya as a regulator recognises its obligation to staff, government, the public, investors and other stakeholders for the continuity of its business operations. The Bank recognises the need to have sustainable critical business operations functional at all times for the purpose of maintaining its ability to fulfil its mandate as provided for under the Central Bank of Kenya Act Cap 491 of the Laws of Kenya.

Risk Management is charged with the following roles in BCM for the Bank:
a)    Spearheading the formulation and implementation of the Bank’s Business Continuity Management (BCM) programme and embedding the BCM culture within the Bank.
a)    Spearheading the formulation and implementation of the Bank’s Business BCM Policy aimed at ensuring Bank’s resilience and effective response to major operational disruptions that may arise from potential disasters.
b)    Coordinating the development, regular exercising and maintenance of the Bank’s Business Continuity Plan (BCP).

Compliance Risk Management and Ethics

The objective of the Bank is to meet stakeholders’ expectations consistent with its core mandate of formulating and implementing monetary policy directed at achieving and maintaining stability in the general level of prices and fostering the liquidity, solvency and proper functioning of a stable market-based financial system.
In pursuing this mandate, the
Bank is committed to adopting best practice and standards in the areas of accountability, transparency and business ethics.

Risk Management compliance is in six parts:
a)    Deals with stakeholder expectations consistent with the Banks core mandate of formulating and implementing monetary policy directed at achieving and maintaining stability.
b)    Deals with the scope of the policy and policy statement. Under the scope, the applicability of the policy is specified. The policy statement states what the bank aims to achieve through adopting the world’s best practices.
c)    Deals with the compliance framework and spells out what it shall achieve through allocation of responsibilities, identification of compliance risk, monitoring, investigating and reporting in line with applicable laws, regulations, standards and codes of conduct.
d)    Deals with the operation structure and implementation steps and it entails the identification and evaluation, setting of the policy, embedding the policy, monitoring, investigation and reporting compliance.
e)    Deals with the roles and the responsibilities of different stakeholders, namely the Board, Governor, Bank Risk Management Committee, compliance function, Internal Audit and staff.
f)    Deals with the review of the policy where the Risk management function shall on a regular basis assess and review the compliance policy to ensure that it remains relevant to the needs of the bank.

Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT)

Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) are serious crimes that adversely affect the integrity of any country’s economic, social and political structures. Money laundering undermines the financial system, encourages crime, dampens Foreign Direct Investment and criminalises society.

Risk Management Function at the Central Bank of Kenya works closely with the Financial Reporting Centre (FRC) in the fight against money laundering and the financing of terrorism and is cognisant of the possibility that its services could be exposed to the risk of money laundering and terrorism financing. Through the AML/CFT Policy, the Central Bank of Kenya spells out measures to ensure that the Bank’s facilities are not used in the commission of, or to further the commission of, financial crimes, particularly money laundering and the financing of terrorist activities.

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