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Risk Management Organization

■ Risk Management Objectives
 
The Board of Directors and senior executives of KGI Securities place great emphasis on risk management. We constantly enhance the risk management practice as a way to strengthen our competitive advantage. The objectives of our risk management are not only to passively control the expected and unexpected losses of the business but also to actively increase the risk-adjusted return on capital. To utilize the capital more efficiently, we allocate the risk capital based on so called “risk appetite”, which takes into account the availability of liquid capital and the financial goals.
 
■ Risk Management Organization

The Board of Directors is responsible for the Company’s overall risk management strategies and for approving the risk management framework and policies. The Board of the Company has appointed three committees, chaired by the President or his delegates, to oversee the risk management matters: Market Risk and Risk Policy Committee (MRRPC), Credit and Originating Pricing Committee (COPC), and New Product Review Committee (NPRC). MRRPC is responsible for planning and supervising risk management matters; COPC is responsible for approving underwriting and investment cases; NPRC is responsible for approving the products to be marketing to our clients.

The duties of Audit department are to ensure the completeness and adequacy of internal control system. It regularly performs internal audits among front, middle, and back offices to ensure related working procedures are indeed followed.

The duties of Legal department include legal advice, contracts drafting and review, material contracts and litigation management.

The duties of Compliance department include regulations guidance and training, consultation of securities and futures trading laws, as well as timely update of relevant laws and regulations. It is also responsible for supervising the periodic self-assessment of legal compliance among all units.

The duties of Risk Management department are to manage risk through ongoing processes of risk identification, measurement, and monitoring, subject to risk limits and other controls. It periodically keeps MRRPC, COPC and the Board updated regarding the Company’s risk management status, and works closely with MRRPC, COPC and the Board to ensure the procedures are compliant with the overall risk framework.

Other business units and back offices should abide by risk management related policies and procedures, and promptly report to MRRPC and COPC if there is any exceptional case and its impact.