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DBK in faces: Knights of a Noble Cause – DBK Risk Takers (Part I)

Ironmen, intellectuals collecting complicated puzzles, sportsmen conquering the peaks of the Alps – who are they DOFR risk takers?

Risk is a noble cause, and managing it effectively is an urgent requirement of the time. Many people think about the need to introduce a risk management system only in times of shock changes in the economy or during its recession against the backdrop of crisis. Development Bank of Kazakhstan paid great attention to development of the risk management system from the very foundation of the Bank in 2001. As the Bank developed, its risk management system also developed by introducing the best practices and such world standards in risk management as COSO ERM, ISO 31000, etc.

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Currently, considering the increasing importance of a risk-oriented approach to implementation of their activities, risk managers of the Department of Operational and Financial Risks will share: how the risk management system is built in DBK, what tools are used to manage financial and operational risks, what skills the risk managers should have, and who are they “knights of a noble cause”.

It is known that a well-functioning risk management system multiplies the company’s profit. How is DBK’s financial risk management system structured?

Director of the Department of Operational and Financial Risks, Adilbek Talkybekuly. For him, keeping track of events and controlling the entire working “risky” process is a constant. Adilbek Talkybekuly has been working in the DBK since 2011, and it is he who knows how to masterly manage risks in order to benefit:

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Risk management is a continuous process aimed at ensuring the effective achievement of strategic goals and objectives which includes identification, assessment, control and monitoring of risks associated with the activities of the Development Bank. One of the standards adopted by the Development Bank as a basis for building a risk management system (RMS) is the agreements adopted by the Basel Committee on Banking Supervision, in particular the agreements “Basel II” and “Basel III”. In addition, recommendations of COSO ERM, requirements of the national regulator and the Sole Shareholder of the Development Bank, “Baiterek” NMH” JSC, international financial reporting standards are taken into account when constructing the RMS. The RMS in the DBK is vertically and horizontally integrated, i.e. it is present in all business processes and in making management decisions.

Along with this, methodological and organizational internal statements have been developed and implemented which ensure the continuous operation of the risk management system. For example, this year a methodology for determining key risk indicators has been developed which will help improve strategic risk management, and approaches to managing country limits are being reviewed as well which will allow taking into account the impact of political risk when setting these limits.

What are the main tasks for a financial risk manager, and how are they implemented?

Madina Kapsatarova - Head of the Department of Financial Risks. Confident, always looking sharp and weighing all the pros and cons, Madina sets the tone and style of work of a responsible financial department. The Head of the Department has been working at the DBK for 9 years and is fond of basketball and numismatics:

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I would like to note that the main tasks of financial risk managers in the Bank include supporting structural divisions when they conduct their operations which may entail implementation of financial risks. Moreover, financial risk managers execute aggregated financial risk management and ensure that the negative consequences of their implementation are minimized. To fulfill these tasks, the current level of risks is monitored on a regular basis, and the possible impact of planned operations is assessed. Besides, stress testing is executed for various scenarios. Its results allow the Bank’s management to assess the consequences of possible stress events and their impact on the Bank’ s financial performance, and then, if necessary, allow them to take preventive measures to mitigate the negative effect when they are implemented.

Who are DBK’s financial risk managers? Please, tell us about the intricacies of the work.

Medet Kokymov - Chief Risk Manager of the Department of Financial Risks. One of the most all-round employees both of the Department and the entire Bank. Medet, having worked for almost 9 years in the Department of Evaluation, and not being afraid to step out of his comfort zone, transferred to the DOFR a year ago. Already not a freshly minted risk taker, he is a regular participant in city marathons and world long-distance triathlon Ironman competitions:

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The delicacy of the risk manager’s work is to track the impact and develop such proposals for minimizing risks that will equally effectively stop the risk in all possible directions. Additionally, in their work, risk managers should also disclose to management the opportunities that financial risks provide. Since with proper financial risk management, there is an opportunity to unlock previously unused potential and get additional income or benefit.

Chief Risk Manager of the Department of Financial Risks, Sholpan Sadykova. Sholpan has been working at the DBK since 2020. Her hobby is assembling complex puzzles with lots of details and intricate patterns. Sholpan believes that this lesson allows you to literally “reboot the brain”, completely distract from life troubles and even find an extraordinary solution to a complex problem both at work and in personal life:

Financial risk managers are actually jack-of-all-trades, as we are approached by all the front divisions of the Bank, both the units for financing of investment projects and export operations, interbank lending, the investment portfolio management unit, and the units that attract financing. At the same time, issues are considered both for individual transactions or operations, and when developing internal documents or new products of the Bank. The main function in this case is to set the “rules of the game” when the front office has the opportunity to work but considering the risks acceptable to the Bank. The work is difficult but very interesting, the main thing is to look for a balance.

There is a term unknown-unknown in risk management, these are risks that are not provided for in the risk management plan. The question concerns the “black swan” Covid-19. Please, tell us if the pandemic was in the focus of the DBK Risk Map? Or did you have to act in a fire fighting mode? What new methods and approaches have been introduced into the work?

Chief Risk Manager of the Department of Financial Risk, Zhomart Yelgezekov. His life credo is “We Must act – Eternity Is Ahead!”, and snowboarding is his inspiration. According to Zhomart, the atmosphere of the mountains, namely the steep slopes, the crisp and all-white snow under your feet and clean, rarefied air that envelops you during a fast descent cannot be compared with anything:

Жомарт Ельгезеков

As part of the risk identification process, a register of risks affecting the achievement of the Bank’s strategic goals and objectives is formed annually. Under risk register for 2021, risks were identified, some characteristics of which could be affected by an external force majeure which implies a pandemic as well. Later it was found that these risks may have a high cross-correlation and, if the situation with the spread of Covid worsens, they may have a higher impact on the Bank’s activities.

Risk Manager of the Department of Financial Risks, Elmira Kanzhashova. Elmira knows and is fluent in programming languages such as Python and R. She is convinced that the future lies in technologies and data processing fields.

After China announced the mass registration of cases of previously unknown atypical pneumonia and before the registration of the first cases of infection in the Republic of Kazakhstan, the Bank developed action plans, conducted a stress test of the impact of the pandemic on the financial stability of the Bank. Preventive measures were taken to minimize the negative effect. Thanks to the existing and developed algorithms of actions, the Bank promptly launched the process of minimizing the negative consequences of the pandemic.

Chief Risk Manager of the Department of Financial Risks, Aigerim Mukashova. Aigerim has been working at the DBK since 2017. She is fond of traveling, swimming, yoga and playing the piano.

Айгерим Мукашова

At the same time, as a preliminary, the Bank’s employees were transferred to a remote work format in a few days thanks to the coordinated work of the Department of Information Technology and the existing action plans in the emergency mode. Later, work was performed with the Bank’s borrowers, additional reserves were formed. In terms of the Bank’s investment assets, at the very beginning of the pandemic, against the background of falling world markets, the Bank had the possibility of potential losses, while the actions of the Bank’s employees allowed leveling possible losses during 2020 and getting a net income as a result, as evidenced by the Bank’s audited financial statements.

What is the level of capital adequacy and asset liquidity?

Chief Risk Manager of the Department of Financial Risks, Timur Bizhanov. The risk taker of the DBK has long been fond of bench aircraft modeling and has already achieved a lot. Timur has been working in the DBK team for more than 2 years:

With regard to calculation and values of capital adequacy indicators, the Bank complies with the requirements established by Government Resolution No. 250 and the Basel II recommendations. The Bank’s capital adequacy and liquidity levels exceed the minimum threshold levels which indicate its stability and investment attractiveness. Thus, at the end of 2020, the capital adequacy ratio and the LCR (Liquidity Coverage Ratio – the ratio of highly liquid assets to the total amount of net cash flow) amounted to 20.15% and 101.45%, respectively, which exceed the thresholds set at 10% and 100%.

Everyone should manage the risk. Please, tell us in more detail how this work is built in the DBK? How are operational risks determined, and what response measures are being taken?

Yermek Azanbayev - Head of the Department of Operational Risks. Yermek started his activity at the DBK in 2020. His hobbies are board games, and he enjoys traveling, reading books and watching sports events as well.

Ермек Азанбаев

The Bank has developed a set of measures and procedures for managing operational risks. For example, identification and assessment of key risk factors of the occurred operational events. Moreover, staff training is performed in terms of increasing the level of risk culture, because as you know, a significant part of operational risk factors are associated with the activities of employees. It should be noted that, unlike the financial risk management process, operational risk management (as well as business process risks) is based on a decentralized approach. This approach does not involve aggregated identification and risk assessment. These management stages are implemented on the side of structural divisions the activities of which may be a source of an operational risk. The activity of the risk block is associated with the methodological support of structural divisions and monitoring and control of the overall level of the operational risk.

Chief Risk Manager of the Department of Operational Risks, Arai Iskakova. Arai has a versatile personality. She is fond of reading detective stories and bestsellers of modern psychology. She has been working in the DBK since 2008. Nothing will go unnoticed, because she knows everything about your actions.

The probability of operational risks being realized is an integral part of any activity. The sources of their occurrence are: failures of internal business processes, staff errors, failures in information systems and the impact of external factors. In order to manage the risks of business processes that are a factor in the occurrence of operational risk, the Bank operates an internal control system (ICS) which is built, inter alia, taking into account the recommendation of the Committee of Sponsoring Organizations of the Treadway Commission “Internal Control – Integrated Model” (COSO IC).

Chief Risk Manager of the Department of Operational Risks, Dana Serikova. Colleagues know Dana as a responsible and dedicated specialist. Her hobby is reading. Dana has been working in the DBK since 2008.

In order to ensure the effectiveness of control procedures and timely identification of risks within the Bank’s business processes, in 2019, work was executed to improve one of the ICS tools – the Matrix of business processes, risks and controls. Within the framework of the updated tool, the Bank shall regularly identify and assess business risks and the effectiveness of control procedures.

During 2020, no material losses related to implementation of operational risk were recorded. The indicators of operational risk factors did not exceed the values established for low and medium operational risk.

In advanced companies, risk managers are reliable advisors. What should risk managers be like in today's realities?

Risk manager of the DOFR, Maksat Akimzhan. Maksat is a purposeful and team player. His colleagues appreciate him for his excellent sense of humor and willingness to help in all matters. Maksat is fond of football and skiing. Maksat has been working at the DBK since the beginning of this year and is the youngest employee of the Department.

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The profession of a risk manager is one of the youngest, and a few decades ago, many companies did not know about the existence of the position of a risk manager. In modern realities, risk managers should receive appropriate education and training in their specialty at universities, have certain knowledge in the field of micro-and macroeconomics, banking, corporate finance, accounting, be aware of the features of international reporting standards, law, mathematics, statistics, depending on the chosen direction. Knowledge of the English language can be noted as a necessary skill which will allow a specialist to have access to international experience in risk management, monitor changes and new practices in the use of risk management tools.

Aidar Zagypar - Chief Specialist of the DOFR. Aidar has been in the DBK team since 2020. His hobbies are music, cars, new technologies and the classic Mafia game. He has over 13 years of experience in the insurance industry.

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Risk managers of the risk block are graduates of KIMEP, MSU, KazEU named after T. Ryskulov, etc. Moreover, most of the employees have a master's degree and experience of studying abroad. A risk manager needs to have the following qualities and skills: analytical and mathematical abilities, critical thinking, understanding and ability to apply various econometric models, stress tolerance, the ability to see a loophole in the general situation in order to close it later and work with information sources with a large amount of data. Employees of the Department regularly participate in various trainings to maintain and develop skills.

Your wishes for the 20th anniversary of the Development Bank.

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Let the Development Bank of Kazakhstan always take a firm and stable position in the financial world. Throughout its history, the DBK has actively participated in solving the strategic tasks of the country’s development; without its financing and lending, it would have been impossible to implement numerous investment programs in the country. The resource base and capital make it possible to finance projects of city-forming enterprises. Currently, it is a modern, reliable and dynamic development institution with a close-knit team. The past twenty years for the Bank and for the entire banking system, have been difficult years of formation, searching for its own way of development. But, nevertheless, the Bank was able to overcome more than one banking and financial crisis always fulfilling its obligations to partners and clients.

We wish the bank stability and reliability, prosperity and development, more successful projects and effective employees, achieving all strategic goals and reaching new levels!

АО «Банк Развития Казахстана»
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