Oversight of Board and Senior Management

Board of Directors:

The Bank’s Board of Directors (Board) is the highest governing authority within the Bank structure. Its role is to ensure that the Bank conducts itself in accordance with its core values and develops them further on a continuous and sustainable basis. The Board consists of professionals from various fields and professions and gives representation to the stakeholders & administrators in the process of decision making. The predominance of independent directors has enabled the Board to have meaningful discussions and take an unbiased and qualitative view on matters placed before it. There is a clear segregation between the ownership of the Bank and the management. The roles of the Chairman of the Board and the Chief Executive Officer (CEO) are separated with a clear division of responsibilities at the head of the Bank between the running of the Board and the executive management responsibility for running the Bank’s business. The Board is responsible for overseeing how management serves the long-term interests of shareholders and other key stakeholders.

• It approves the delegation of power to the executive management as well as the sub-committees of the Board and specifies their roles, responsibilities and powers. Approves delegation matrix ensuring escalation of authority for enhanced risks.
• Authorizes the management to implement the strategy for the Bank that is designed to deliver increasing value to the shareholders.
• Develops vision to anticipate crisis and to act proactively when necessary.
  Ensures that information flows upward and that authority flow downward and thus the Bank is under their control, direction and superintendence.
• Board is ultimately responsible for the management of all risks in the Bank and it is discharged by:
  Advising the Management on policy guidelines and controls required for effective credit risk management and ensure that policies, systems and processes are put in place.
• Ensures that the business as well as risk management functions are supported by adequate and robust IT & Management Information Systems (MIS) to ensure identification, measurement & monitoring of risk in a timely and accurate manner.
• Approves the Bank’s Risk Appetite Framework (RAF) developed by the concerned executive management team and ensure that it is consistent with Bank’s short and long term strategy, business and capital plans, risk capacity and compensation plans.
• Ensures staff performance appraisals take in to account sound risk management practices and behaviours as one of the inputs to decide on the compensation of the employee.
• The Board holds the CEO and the senior management accountable for the integrity of the RAF, including timely identification, management and escalation of breaches in risk limits and material risk exposures.
• Assumes the overall responsibility for deciding the risk appetite of the Bank. These limits are regularly reviewed based on the circumstances and at the time of review of various policies.
• Approves various policies, limits in line with the risk appetite of the Bank.
• Ensure compliance to regulatory/ internal risk limits.
  Breaches, if any, in the internal / regulatory limits are analyzed and action to be taken is discussed.
• The senior management is made accountable for the breaches made outside the Board approved limit.
• The Board has put in place a lower internal limit to regulatory limits and mechanism to monitor the same to ensure that senior management can act in a timely manner to effectively manage & mitigate material adverse risks.

Management Structure

Board Level Committees:

The Board is the top authority within the Bank and is ultimately accountable to the shareholders. The Board of Directors has established various subcommittees for specific purposes with clearly defined terms of reference and responsibilities. The committees’ mandate is to ensure focused and specialized attention to specific issues related to the Bank’s governance.

Board Level Committees:
The Board is the top authority within the Bank and is ultimately accountable to the shareholders. The Board of Directors has established various subcommittees for specific purposes with clearly defined terms of reference and responsibilities. The committees’ mandate is to ensure focused and specialized attention to specific issues related to the Bank’s governance. Board Audit committee (BAC)

The main functions of the Board Audit Committee are to assess and review the financial reporting systems of the Bank to ensure that the financial statements are correct, sufficient and credible. BAC reviews with the Management the quarterly / annual financial statements before their submission to the Board for adoption. BAC also reviews the adequacy of regulatory compliance, regulatory reporting, internal control systems and structure of Internal Audit and Compliance Departments. BAC also holds discussions with the internal auditors / external auditors on significant finding on the control environment.

The role of Head of Internal Audit is to provide reasonable assurance that the management control framework used within the Bank is operating effectively. The role of Head of Compliance is to ensure that the Bank complies with all the Laws, rules and regulations as applicable under the regulatory framework in Sultanate of Oman and international best practice. Both heads report directly to the BAC.

Board Credit Approval Committee (CAC)
This committee assists the Board to discharge the Board’s responsibilities of oversight and governance in relation to the credit performance of the Bank. The objective of the CAC is to approve large loans falling outside the lending mandate of the CEO and his senior management lending team and optimize the quality and return on deployment of assets.

Board Risk Committee (BRC)
This committee has the responsibility to assist and advise the Board to improve the organizational ability to identify, measure, monitor and control the overall risk profile of the Bank. BRC is responsible for making recommendations to the Board on the risk appetite of the Bank in relation to credit, interest rate, market, liquidity and operational risk with focus on the policy framework. The objective of the BRC is to ensure implementation of risk strategy and policy in addition to ensuring that a robust risk framework is in place within the Bank. BRC will also provide guidance and direction on all credit, market, interest rate, liquidity and operational risks matters. The BRC will ensure that risk management has an institutional framework, independent of business lines, with clear delineation of levels of responsibility for management of risks. It also provides guidance to management level risk committees like Management Risk Committee (MRC), Asset & Liability Committee (ALCO) and Expected Credit Loss Committee (ECL). BRC is a sub-committee of the Board of Directors. It has the responsibility to assist the Board to improve the organizational ability to identify, measure, monitor and control the overall risk profile of the Bank. The committee is responsible for making recommendations to the Board of Directors on the risk appetite of the Bank in relation to credit, interest rate, market, liquidity, operational risk, reputational risk, information security and business continuity management with focus on the policy framework.

The objective of the BRC is to ensure implementation of risk strategy and policy in addition to ensuring that a robust risk framework is in place within the Bank. The committee will also provide guidance and direction on all credit, market, interest rate, liquidity, reputational and operational risk as well as information security and business continuity management matters to ensure that the policy framework is in place. The BRC will ensure that the risk management has an institutional framework, independent of business lines, with clear delineation of levels of responsibility for management of risks. Board Executive Nomination and Remuneration Committee (ENRC)

This committee assists the Board to discharge the Board’s responsibilities of oversight and governance in relation to Human Resources and implementation of the Strategic Plan. Key responsibilities:

• To review and recommend the Annual Budget and Business Plan to the Board.
• Ensure the Bank adopts appropriate corporate strategy, including Information Technology (IT) strategy and has the required resources to obtain its business and IT objectives;
• Ensure the Bank has systems in place to measure and monitor the business performance and operational efficiency of the enterprise.
• Confirm the Bank has appropriate Code of Business Conduct and adopt a culture to nurture proper and ethical behavior to protect the integrity of the Shareholders;
• Confirm that actual performance, including the Bank’s investment portfolio is in line with annual plans and that variance are managed properly.
• Review policies of various business and support functions in liason with management whenever required.
• Ensure the dividend declared in fair terms of returns to Shareholders, retention profits and capital adequacy.
• The Bank has organizational charts for all levels and functions in order to cascade business objectives, delegation of authority, efficient decision making and flow of information;
• The Bank continues to have the right Chief Executive Officer and Senior Management team (AGM and above) including the Company Secretary (Board Secretary);
• The Bank includes a customer centric culture based on high ethical standards, quality service, high performance and respect and fairness to all stakeholders;
• Review Human Resource (HR) policies, at least annually, and provide guidance and support in the implementation of the HR strategy;
• Annually review and approve the succession plan to ensure business continuity;
• Periodically review the progress of Omanization in the Bank, mainly in the middle and top management cadres and provide guidance and support to the HR function to provide career growth to Omani nationals at all levels;
• Annually review the overall staff performance levels in Bank to ensure that Bank’s goals and targets are achieved;
• Recommend suitable staff performance related rewards and remunerations reviews to the Board to motivate and retain higher level of performance and at the same time ensure Bank is exposed to undue risk
• Review reports relating to staff grievances, employee opinion surveys, staff exit interview reports, disciplinary action against staffs, whistleblowing to ensure higher level of employee satisfaction, motivation, disciplined and ethical behavior of the staff;
• Recommendation of appointment of Sharia Supervisory Board to the Board;
• Approve consultancy and capital expenditures/fees recommended by the Management as per authorities granted to the ENRC from the Board in this respect;
• Study various recommendations submitted by Management regarding participation in or performing direct investments for the Bank, as per the authorities granted to the ENRC from the Board in this respect;
• Take decision to authorize the Management to grant as deemed appropriate the right for signature to employees of the Bank (i.e. approve)
• Review Investments of the Bank at least once in every quarter, as per CBO regulations; and

Management Level Committees

Executive Credit Committee (ECC)
The main objective of this Committee is to approve credit and take lending and investing decisions within its delegated authority. CEO is the chairman of the committee. The other members of the committee are CRO (who will sign off only for the level of risk and will not be involved in credit approval decision making as he is a nonvoting member). Head of Corporate Banking, Head of Retail Banking, Head of Operations & CFO. If the CRO does not find the risk to be acceptable, then the proposal will be escalated to Credit Approval committee. All the approvals of the ECC are consolidated and placed to the Credit Approval committee of the Board for noting.

Management Risk Committee (MRC)
A management level committee consists of all divisional heads from Risk, Internal Audit, Wholesale, Retail, Treasury, Operations, HR, IT, Finance, Compliance, Legal. The objectives include (1) To oversee the risk management function of the Bank, (2) To establish improved and enhanced risk awareness and risk culture within the Bank and (3) To minimize the risk losses of the Bank by establishing appropriate process, robust systems, qualified human capital, delegation matrix, segregation of duties, maintain high quality of loan assets, maintain adequate liquidity standards with back up lines, Business Continuity Management preparedness, and excel in customer service.

MRC will be responsible for an overall oversight of the risk management in the Bank. This will broadly include the following responsibilities, though not limited to:

• Establishing consistent definition for risk management across the Bank’s business units.
• Developing Risk policies and practices to ensure that all risks are appropriately identified, assessed, measured, monitored and controlled. Implementation is subject to the BRC and Board approval.
• Periodic monitoring and treatment of risks across all Bank products, and monitoring the enterprise wide risk dashboard.
• Recommend through BRC the risk strategy of the Bank including but not limited to the Bank’s credit strategy according to the Board approval.
• Recommend through the BRC the Bank wide risk appetite, policy, and framework within the segments of credit, market, operational, reputation, legal and accounting risks for the Board approval.
• Review regularly the stress testing scenarios to measure the impact of unusual market conditions and monitor variances between the actual volatility in portfolio values and forecasted by the risk measures and findings.
• Review/monitor specific credit policy issues including but not limited to credit rating models, country limits, concentration issues, loan review mechanism and findings, classification policy for loans and provisioning, policy, periodic review of the Bank’s credit risk rating, and other risk management methodologies implemented in the Bank.
• Ensuring that all credit portfolios are managed in accordance with the regulatory guidelines and Bank’s policies and limits.
• Monitor and review all aspects of information security risk and business continuity management preparedness across the Bank.
• Monitors the reputation risk by taking cognizance of nature and intensity of customer complaints concerning the quality of service, compliance of laws and regulations, litigation against the Bank, media reports and public perception besides management efficiency and quality.
• Monitor strategic risks by looking into the changes in the Bank’s strategies and major business initiatives undertaken which have a long term impact on profitability, stability of business and growth. The committee will oversee the management of risks associated with strategic initiatives on products and services, including expansion plans etc.

MRC is responsible for managing Operational Risk including the following:

• Establishing consistent definition for operational risk across the Bank’s business units
• Ensure that appropriate operational risk management framework is in place
• Developing Operational Risk Policies & Practices to ensure that operational risk is appropriately identified, measured, monitored and controlled
• Review and approve the development and implementation of operational risk methodologies and tools, including assessments, reporting, and capital assessment
• Periodic monitoring and treatment of operational risks.
• Building database on Operational Risk Loss of the Bank
• Developing strategies for mitigating operational risk through risk-mitigating products such as insurance, outsourcing etc.
• Identify major operational risk loss areas and significant risks affecting the Bank.
• Oversee the customer complaints remediation mechanism in the Bank. To have an oversight and ensure Customer complaints are resolved in a fair, and transparent manner within the timeframe
• To ensure customer service standards are maintained and improved in Sohar International.
• Provide directives to improve customer service
• Ensure that, where appropriate, the complaints resolution adheres to the policies and frameworks of Sohar International.
• Deliberate customer complaints that originated from operation risk incidents
• To arrive on permanent solution on high frequently reported complaints
• Ensure that all key stakeholders are included in the decision-making process and that all necessary approvals are obtained at the relevant stages throughout the complaints resolution mechanism/ improving customer service
• Ensure that the committee is in a position to take informed decisions.
• The responsibilities will be fulfilled in a phased manner based on the implementation of the operational risk management framework.
• Ensure the Bank has adopted an Information Security Policy and is maintaining the policy standard;
• Ensure that the Bank has an appropriate IT Disaster Recovery and Business Continuity Plan;

IFRS 9 Steering Committee

IFRS 9 steering committee, a management level committee, is established in response to the governance requirements of IFRS 9 standard. Purpose of this committee is to build a robust framework around the governance of the overall ECL Models and all other such models (as may be prevalent) that may directly/indirectly affect the financial reporting on Expected Loss (EL). The Framework establishes a systematic approach to manage the development, validation, approval, implementation and on-going use of the ECL models. It sets out an effective management structure with clearly defined roles and responsibilities, policies and controls for managing model risk. The Framework is reviewed on a regular basis to ensure it meets regulatory standards and international practices. Any major change to the constitution, framework and/or roles & responsibilities is approved by the BRC.

Asset Liability Management Committee (ALCO)
The Asset and Liability Committee (ALCO) is established under charter of the BRC and is mandated for overall management of the assets and liabilities of the Bank. ALCO manages the Banks’s liquidity, funding, market and capital risks across the organization. ALCO is a strategic decision making committee and although not involved with day to day operating issues, will direct and opine on significant issues impacting the Bank. Policy implementation is delegated to managers who are responsible to the ALCO for achieving stated asset and liability management objectives. Treasury in particular has significant responsibility for executing ALCO decisions in line with ALCO approved policies including the Liquidity Contingency Plan. ALCO is expected to combine the techniques of asset management, liability management, capital management, market risk management into a cohesive process leading to an integrated management of the total balance sheet.

The principle aim of Asset and Liability Management (ALM) is to achieve sustainable and stable profits within a framework of acceptable financial risks, which includes funding and liquidity risk, interest rate risk and foreign exchange risk, equity price risk, trading risk and capital management. ALCO will be the principal management forum for ALM and related longer-term strategy.

BUSINESS TECHNOLOGY COMMITTEE (BTC)
The Business Technology Committee (BTC) is a Management Committee, providing strategic direction and continued advisory services to ensure that the technology environment of the Bank is state-of-art, robust and flexible to meet the challenges faced with changes in the business environment. In this role, the BTC will focus on Business related projects, products and services that require IT systems implementation.