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South African Reserve Bank

Risk management process 

Risk management approach
A prudent approach to risk management for domestic and foreign operations is adopted through limiting investment activities to high quality assets, a specifically considered set of sovereigns, pre-defined currencies, diversification across assets and sectors, and appropriate collateral. This is achieved by the formulation of a well-researched SAA and a sound set of investment guidelines. 
The Board Risk and Ethics Committee (BREC), the Governors’ Executive Committee (GEC), the Risk Management Committee (RMC), and the Reserves Management Committee (Resmanco) provide independent risk control and compliance functions, supported by the relevant functional departments.
The Bank’s compliance function ensures that the Bank complies with applicable laws, regulations, codes of conduct, internal controls and other relevant standards and policies for sound practice.
Risk monitoring and reporting
The Bank’s financial and operational risk and returns on foreign exchange reserves and domestic market operations are subjects of ongoing monitoring. Risk reports (daily, monthly and quarterly) are prepared for various levels of management within the Bank to enable them to make informed decisions and judgements.
The risks facing the Bank are reported monthly to the Resmanco, and quarterly to the GEC, Resmanco, RMC and BREC, inter alia.
Risk methodologies
The Bank values its financial assets at fair value on a daily basis.  The valuation methodologies are in line with market best practice to ensure that risk is measured accurately. Comprehensive stress tests, scenario analysis and Value-at-Risk (VaR) calculations constitute some of the key measures used to assess the level of risk associated with specific assets. Stress testing and scenario analysis are risk management tools used to complement VaR, which include sensitivity tests of extreme but possible risk factors, and the analysis of severe historical and hypothetical macro-economic scenarios.
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