CONVENTIONAL BANKING Overview Is the Bank s Board spending enough time and resources on making sure the Bank is developing the desired culture and is it strong enough to be sustainable for the long run? The Board is central in setting the tone for accountability, transparency, fairness and performance. What is the Board s role in setting the strategic planning and risk management agenda for the Bank?
Session 1: Corporate Governance Board Self Evaluation Every Bank s Board should assess their own performance periodically and commit to continual improvement. Boards should ask questions like: Is the Board at the right level of governance? Is it excessively focused on micro-management or does it simply act as a rubber stamp? Does the Board spend enough time on strategic planning? Does the Board have the right skillset? It is critical that Boards ensure a proper succession plan for senior management and for the Board itself. Boards need to evaluate the compensation plan for the Bank and examine the personnel changes that might be needed within the Board itself or at senior management level to fill gaps in knowledge or experience. Tools for self-evaluation Benchmarking The best practices Challenges in Self evaluation Session 2: Risk Implementing Robust Risk Appetite Frameworks Risk Management is pivotal to achieve business objectives while optimising risk profiles and protecting value. Healthy Bank Boards should have confidence to face their market with an increasing appetite for risk. How Bank Boards consider risk and their risk appetite will help management make decisions to achieve their goals. Given the changes in interest rates and economic growth, most Banks need to take a pragmatic approach towards risk. Growth requires more capital, staff, transactions, customers, fixed costs and more planning. It is important that the Bank s Board pro-actively understands what risks the Bank is taking on and what the return is on that risk, resulting in superior decision-making process. Articulating Risk appetite Risk appetite framework policies and procedures Risk appetite vs. Risk capacity Risk committees Session 3: Compliance - Combating Financial Crime Compliance ensures a Bank operates within legal, contractual, social, regulatory and ethical boundaries. The regulatory compliance obligations of Banks continue to grow, and with them come increased expectations from regulators regarding the role of Bank Directors in overseeing how their Banks meet those obligations. As a result, Board books are getting thicker, Board meetings are becoming longer, and the line between the roles of management and the Board is becoming increasingly difficult to define. Boards can meet regulatory expectations by staying abreast of compliance trends. The Bank s Board is responsible for the oversight of its policies, procedures, systems, controls and assurance for anti-money laundering, sanctions compliance, and prevention of bribery, corruption and tax crime, alongside its oversight of the financial crime compliance including financial crime risk mitigation. Understanding financial crime risks Financial crime risk framework Risk based Approach De-risking FOR FURTHER DETAILS Please contact the Centre for Academic Studies & Executive Development: Tel: (+973) 1781 5555 / 6320 / 6327 E-mail: directors@bibf.com
ISLAMIC BANKING Overview The session will provide comprehensive understanding and practical knowledge on the role of the Board of Directors in Shari ah governance for Islamic financial institutions and how it affects Shari ah compliance so that the members will be able to properly manage the risk of Shari ah noncompliance. It will also highlight and discuss the relevant scope, scale and procedures related to the Shari ah compliance review process and methodology. This will include areas of Shari ah governance standards based on recent guidelines and governance structures issued by the IFSB and AAOIFI.
Session 1: Principles of Shari ah As the Islamic finance industry grows, the Shari ah compliance obligations of Banks continue to increase and with them come increased expectations from regulators and stakeholders regarding the role of the Board in overseeing how their Banks meet those obligations. As a result, it is imperative for the Board to have an understanding of Islamic teachings in the broader financial system as well as the contractual relationships underpinning financial transactions in accordance with Shari ah. Shari ah and Finance Shari ah principles in Islamic finance Shari ah as the basis of the Islamic financial system Shari ah contracts in Islamic Finance Session 2: Shari ah Risk Management Risk management is a way of dealing with uncertainty, a framework by which organisations predict potential liability and plan for it strategically. At the heart of risk management are some simple questions: What can go wrong? What should you worry about? What will you do to diminish the worry? How will you pay for that? For the Boards of Islamic Banks, these questions can be thought of more systematically as What Shari ah risks are inherent in the actions we take to fulfill our mission? Given that context, by which processes will our organization strategically identify risks, set priorities for what risks to address, create a plan to deal with them, and then implement and monitor the plan? Risk in Islamic perspective Shari ah non-compliant risk Shari ah compliant framework for Islamic finance Implications of Shari ah non-compliance Shari ah compliance process Shari ah compliance output Malaysian experience in Shari ah risk management Session 3: Shari ah Governance in Islamic Financial Institutions Shari ah governance is a vital part of corporate governance that needs to be seriously taken by Islamic financial institutions. Non-compliance is potentially costly and adversely affects the continuity of business for IFIs. Boards of Directors play a significant role in the Shari ah Governance Framework in ensuring an end-to-end Shari ah compliant operation of an Islamic financial institution. Meaning of Shari ah governance The importance of Shari ah governance in IFIs Regulatory framework for Shari ah supervision Shari ah Compliance Product Structuring The process of Shari ah review and Shari ah audit The Role of the Board of Directors in Shari ah Governance FOR FURTHER DETAILS Please contact the Centre for Academic Studies & Executive Development: Tel: (+973) 1781 5555 / 6320 / 6327 E-mail: directors@bibf.com
CONVENTIONAL INSURANCE Overview The sessions are designed to equip directors of conventional insurance companies with high level insurance- specific knowledge that will enable them to discharge their responsibilities effectively. The sessions aim to identify the unique aspects of managing insurance operations as opposed to the broader concern of the financial services industry.
Session 1: Aspects of Insurance Governance The insurance sector is considered as part of the financial services industry and is commonly subject to the same regulatory framework. However, insurance is distinct from other financial services and effective management and governance of its operation is dependent on a proper understanding of the unique features of insurance. For instance, while growth is generally a positive business indicator, excessive growth is considered an alarming factor if not achieved with a consideration of future claims costs. Managing insurance cycles (Soft vs. Hard) Managing insurance risks Life vs. General insurance Growth and its implications for long-term profitability The double business: Balancing underwriting results and investment returns Reinsurance protection: Setting the right retention limits Session 2: Analysing the Financial Statements of the Insurance Companies Understanding the financial statements of an insurance company in order to assess its overall performance requires an appreciation of the main insurance-specific variables such as different forms of premium and claims. Additionally, there are specific financial ratios commonly used to assess technical performance in the insurance industry, which Boards of Directors need to understand. Written premium vs. Earned premium Paid claims vs. incurred claims Profitability ratios (Loss ratio, commission ratio, expense and combined ratio) Portfolio rates (New business rate, cancellation rate, retention rate) Session 3: Claims Reserving and its Implications for Profitability and Compliance Claim reserve is the most elastic figure in an insurance company s balance sheet. Accurate reserving is in the best interests of the main stakeholders served by the Board of Directors. It reduces volatility in profits reported to shareholders, ensures adequate funds are set aside for policyholders claims and it assures regulators of reliable financial reporting. Regulators impose a duty on Boards of Directors to ensure that the insurance company s reserves are accurate and adequate. The importance of proper reserving Unearned premium reserve (UPR) Outstanding claims reserve Incurred but not reported Claims (IBNR) Case Study: Equitable Life Insurance Company FOR FURTHER DETAILS Please contact the Centre for Academic Studies & Executive Development: Tel: (+973) 1781 5555 / 6320 / 6327 E-mail: directors@bibf.com
ISLAMIC INSURANCE (TAKAFUL) Overview The session is intended to provide Boards of Directors with a solid knowledge of Islamic insurance s underlying Shari ah principles, main operating models and governance structure. Seasoned insurance professionals serving on a Takaful company Board are expected to have a clear understanding of the distinction between Islamic insurance and its conventional counterpart. Combining conventional insurance expertise with a knowledge of the principles of Takaful will best enable members of Takaful Boards to discharge their responsibilities effectively.
Session 1: Shari ah Principles Applicable to Islamic Insurance Growth in global demand and interest in Takaful, combined with the expectation of Shari ah compliant operations, means that Islamic Insurance companies are under ever increasing public and regulatory scrutiny. While the ultimate responsibility for ensuring adherence to Shari ah rulings lies with a separate governance body constituted in the Shari ah Supervisory Board, the Takaful Board of Directors need a basic understanding of main Shari ah principles relevant to Takaful to carry their duties effectively. Islam s position on risk mitigation Shari ah scholars objections to conventional insurance The main Shari ah principles underlying the concept of Takaful Shari ah compliant contracts utilised in Islamic Insurance Session 2: Takaful Models The concept of Islamic Insurance is credited to Shari ah scholars who established a Shari ah compliant alternative to conventional insurance. There are different Takaful models, operated by different jurisdictions and different insurance companies. It is critical for Board members to develop an awareness of the commonly used models to ensure that the model adopted by their company is most suitable and approved by the regulator. Pure Wakalah model Pure Mudarabah model Mudarabah-Wakalah model Waqaf model. Session 3: Governance of Islamic Insurance Companies Effective and compliant governance of Islamic insurance companies requires an understanding of operational aspects specific to those companies. It is critical to appreciate the importance of the segregation of policyholders and shareholders funds, the distribution of surplus using Shari ah compliant methods and the critical interplay between the Board of Directors, the company s executive management and the Shari ah Supervisory Board Shareholders vs. policyholders accounts & statements Surplus and deficit treatment. Shari ah Supervisory Board FOR FURTHER DETAILS Please contact the Centre for Academic Studies & Executive Development: Tel: (+973) 1781 5555 / 6320 / 6327 E-mail: directors@bibf.com