PASHA_BANK ANNUAL REPORT 2021

57 Annual Report 2021 PASHA Bank Risk Management Committee The Risk Management Committee was established to ensure that the Bank’s risk identification, evaluation, measurement, control, reporting and monitoring processes and capabilities are effective, adequate, and reliable, and to advise and assist the Board of Directors on this matter in meeting its duties and responsibilities. Tasked with establishing an effective risk management system, the Risk Management Committee sets out the Bank’s risk management policies and strategies in accordance with the Capital Markets Legislation and the principles contained in the BRSA regulations; reviews the types of credit, market, strategic, operational, and financial risks that it is exposed to; monitors implementations of the risk management strategy; and presents important risk issues to the Board of Directors. It also evaluates, and reports to the Board of Directors, the issues identified on the topics of managing such risks in accordance with the corporate risk‑taking profile of the Bank, taking them into account in the decision‑making mechanisms, and establishing and integrating effective internal control systems in this direction. The present structure of the committee is given below. Name‑Surname Committee Position Ebru Oğan Knottnerus Chairperson Farid Mammadov Member Kamala Nuriyeva Member The Committee conducts its operations in accordance with the Risk Management Committee Regulation came into force on 23 September 2016 and was last updated on 24 July 2020. Meetings are held at least once in each quarter and as frequent as required by the business needs. Board of Directors’ Evaluation of Committee Effectiveness The Risk Management Committee presented the results of its activities and its assessment of internal systems in quarterly activity reports. The Committee reviewed and challenged the formulation of the Risk Appetite Statement, in order to assure that it is effective in setting appropriate boundaries in respect of each Principal Risk Type and presented the calculation methodology of related criteria and their suggestions of changes in Operational Limits to the Board of Directors. It tracked a broad range of risk metrics that are reported to the Committee periodically. During the fiscal period, Risk Management Committee held 12 meetings to discuss and evaluate the policies and procedures for risk management process, ICAAP road map, scenarios and reports, monthly risk management reports prepared by the Risk Management Department, 2021 Risk Appetite Statement and operational limits, any breaches of the identified limits, credit authority limits within operational limits, limits of financial institutions and their effects on risk appetite, stress test results, internal credit risk rating model monitoring outcomes, quarterly activity reports by the Risk Management Committee, action plan for risk health index executed Group‑wide, non‑performing loans and provision calculations for them, information security and information technologies risks within the context of operational risks, effects of foreign currency fluctuations on limits defined at risk appetite statement, results of macroeconomic scenario calibration related to expected credit loss and macroeconomic forecasts, annual internal control plan and improvements realized. Meeting Dates Number of Attending Members Type of Meeting 19 January 2021 3 Videoconference 18 February 2021 3 Videoconference 16 March 2021 3 Videoconference 20 April 2021 3 Videoconference 20 May 2021 3 Videoconference 17 June 2021 3 Videoconference 14 July 2021 2 Videoconference 10 August 2021 3 Videoconference 14 September 2021 2 Videoconference 15 October 2021 3 Videoconference 19 November 2021 3 Videoconference 10 December 2021 3 Videoconference