PASHA BANK ENG 20

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 updated on 1 March 2019. 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. The Committee considered and recommended the Risk Appetite Statement and Operational Limits to the Board for approval. As part of the 2020 annual review of Risk Appetite, changes were largely limited to refinements to existing metrics, as well as delegation of authority to the Committee for the Operational Limits and related metrics. Within the scope of the annual review of the Risk Appetite, suggested changes in relation to the Capital Adequacy Ratio, Problematic Loans, Profit/Risk Weighted Assets metrics are evaluated by the Committee for subsequent referral to the Board of Directors. Tracked a broad range of risk metrics that are reported to the Committee periodically. During the fiscal period, Risk Management Committee held 13 meetings to discuss the policies and procedures for risk management process, ICAAP activities, monthly risk management reports, 2021 Risk Appetite Statement and operational limits, any breaches of the identified limits, provision models that will be set aside according to IFRS 9, IFRS impairment loss methodology, stress test results, Stress Test Operating Guideline, Internal Credit Risk Rating Model Project outcomes, quarterly activity reports by the Risk Management Committee, Action Plan for Risk Health Index, analysis of the loans for which the Credit Committee or the CEO is authorized; the Credit Policy, Credit Monitoring Committee Regulation, Fraud Risk Management Program, non-performing loans, Internal Control Unit annual control plan and improvements to the plan, business continuity management plan and crisis management plan, operational risks stemming from information technologies, new regulatory arrangements in response to market developments and volatilities, and the projects in progress. Evaluations Regarding the Activities of the Board of Directors and the Committees 52 Annual Report 2020 PASHA Bank Information on Management and Corporate Governance Practices