As a Primary Mortgage Bank, ASO is exposed to the following risks:
To mitigate the risks listed above the following units are responsible for implementing the Bank's risk management and internal control policies:
Credit Risk Management Unit
Mortgage lending is the principal business activity for ASO. The loan portfolio is typically the largest asset and predominant source of revenue. As such, it is the greatest source of risk to the Bank's safety and soundness. The department consists of the Portfolio Planning & Risk Reporting, Credit Analysis, Credit Admin & Processing units, and together they implement credit policies and procedures in line with credit approval authorities granted by the Board. The credit risk management unit is responsible for monitoring the quality and performance of its credit portfolio and for controlling credit risks in its portfolio. During the financial year, we have continued to focus on enhancing our capabilities in providing both qualitative and quantitative data to the board on risks associated with credits and facilitating more informed and effective decision making. Our lending criteria for all lending products have further been strengthened during the year while collection and recovery processes enhanced. This is evidenced by a significant reduction in the volume of our NPL.
Operational Risk and Compliance Unit
Operational risks arise as a result of inadequate or failed internal processes, people, and systems or from external events. When these risks crystallize, they result in operational losses such as legal costs and liabilities, interest claims, penalties and fines paid to regulators, losses or damage to assets, and write downs on financial assets. The operational risk team through risk identification and assessments, measurement and monitoring reduces the likelihood of occurrence of risk events and their impact on the Bank's bottom line. Operational risk management tools such as risk and control self assessments and incident management and reporting have been deployed in identifying new risks and adverse trends bank wide, thereby improving operational capabilities. ASO is also the first Mortgage Bank in Nigeria to institute a loss data capturing system in efforts towards Basel compliant.
During the year, ASO strengthened its regulatory reporting capabilities by deploying an automated anti-money laundering solution for reporting currency and suspicious transactions to the regulators. To further create a compliant environment, the Compliance Team commenced training of new staff on regulatory compliance as part of their induction programme. Trainings covered topics such as Know Your Customer (KYC), Politically Exposed Persons (PEPs) and Due Diligence.
It is worth mentioning that no regulatory infringement was reported during the period and as such no penalty, sanction or fine was incurred by the Bank.
Real Estate Risk Management Unit
This unit has the responsibility of ensuring that ASO's risk assets are adequately collateralized and that real estate construction projects are delivered within cost/budget and timelines, and according to scope and specification. The unit conducts field assessments and site inspections and produces valuation reports which form the basis for the consideration of collaterals and loan disbursements. A proposed Project Management Unit will help in manage the risks inherent in large real estate projects.
In its bid to contain construction risk the real estate risk management unit assesses developers' ability to commence and complete the project within budgeted time budgeted costs. The unit also assesses the ability of the developers to deliver houses of requisite quality. Their ability to ensure that changes in prices of materials, labour and land acquisition are not adverse reduce the chances of projects being abandoned by developers.
This unit also manages risks in property exposure via valuations and appraisal assessments to ascertain the appropriateness of properties as collaterals and their ability to be easily converted to cash in the event of default by a customer. The forced sale value of a property must be able to cover the bank's exposure. Hence, the need for a thorough evaluation and assessment to guarantee that all risks inherent are adequately taken into consideration.
Remedial Management Unit
ASO Savings like any other financial institution has set up the remedial management unit with the mandate to reduce to the barest minimum, the rate of nonperforming loans in the Bank. In recent past, the Bank was overburdened with a huge volume of nonperforming loans which significantly impaired the Bank's earnings and shareholder value. The establishment of this unit has contributed in moving the Bank from a negative to positive position in terms of profitability. Aggressive recovery using well experienced recovery agents, robust remedial techniques and a hard line posture on defaulters yielded great results.
Information Technology (IT) Risk Management Unit
The IT Risk Management department consists of IT Risk Assessment and Monitoring which is responsible for IT risk assessment over IT and business processes, IT applications and supporting infrastructure; the System Control unit responsible for user access management and ATM PINs management; the CBA/Revenue Assurance unit responsible for periodic review of controls over the core banking application and over system processing of automated transactions such as revenue; the Information Security, Business Continuity and Crisis Management responsible for ensuring that infrastructure threats and vulnerabilities are identified and managed and that the disaster recovery plan and business continuity plan are updated and tested on a regular basis.
Internal Control and Compliance Unit
The unit is responsible for ensuring compliance with the Bank's policies and standard operating procedures. The internal control process is designed to provide reasonable assurance regarding the effectiveness and efficiency of operations and the controls around them, the reliability of financial reporting, and compliance with applicable laws and regulations. The unit has adopted COSO internal control framework as the approach towards achieving control objectives.
Service Quality Management Unit
Service quality management (SQM) is a vital ingredient in ASO's ability to maintain profitability and continued success in business. Not only does Service Quality build loyalty for both ASO and its products, it guarantees ASO's viability in today's competitive market.
During the financial year SQM implemented the Mystery Shopping exercise which focused on the Bank's ambience, service, processes, people and attitude resulting in overall improvement in customer service delivery. In achieving its objectives, SQM partners with business units to establish and manage the quality of service from a customer's perspective and create a service oriented culture