Risk Mgt

Risk Management



 Unity Bank recognizes the importance of risk management practices in the achievement of its overall strategic objectives. The Bank has an effective risk governance structure and an experienced risk team. Its risk management structure facilitates maximization of opportunities, mitigation of potential threats and timely decision making.

The Bank realizes that effective risk management is fundamental to achieving financial soundness. To this end, risk management has become an integral part of our strategy. A major target is to create a homogeneous risk awareness culture throughout the institution. This will help all staff to collectively own risk.

Risk management style is well defined to create a balance between corporate oversight and actual risk management functions with a focus on the three lines of defence below:


In the process of prospecting businesses for the Bank, risk management should be activated. This will reduce the burden of assessment of other risk functions. In the case of a process breach in line with management objectives, internal audit will identify and recommend for process correction.

The management of the Bank is committed to constantly creating, implementing and sustaining practices in risk-management that will take the bank to new heights. The Board of Directors determines overall risk objectives, issues and/or approve risk policies in line with the Bank’s overall objectives and risk appetite. The said polices define acceptable levels of risk levels and a pathway for assessment and treatment where necessary.

Enterprise Risk-Management (ERM) framework encompasses all other risk management policies, since ERM in the aggregate of identifying risks, assessing the risk inherent and the opportunities therein and actively managing these risks in a cost-effective manner.


The Bank risk management process originates from establishing a context to monitoring and reporting as shown below:

  1. Establishing a context

This is done by considering the following:

  • The environment within which the organization operates (Organizational context)
  • The objectives, core activities and operations of the Bank (Strategic context)
  1. Identification of risks

This is basically done by classifying the risks into core financial, physical, ethical or legal. It also involves determining what can happen, when it could happen and where it could happen.

  1. Evaluation of risk

It involves analysing likelihood and consequences of risks identified

  1. Treatment of risks

The decision point of whether to avoid the risk, transfer the risk or accept and mitigate the risk.

  1. Reporting and monitoring of risks

Communication, monitoring and review ensure that the important information generated by the risk management process is captured, used and maintained.


The following risks are directly managed by the bank:

  1. Credit Risk
  2. Market Risk and liquidity Risk
  3. Operational Risk
  4. Strategic Risk
  5. Compliance and Legal Risk
  6. Reputational Risk
  7. Interest rate Risk
  8. Foreign Exchange risk


Credit Risk

A credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of a lender and it includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances

The Bank has taken proactive measures to continually mitigate risks arising from its credit risks and counter-party risks with an effective risk based pricing model and assessment process.

Market Risk

The Bank’s exposure to potential loss or gain as a result of favourable or unfavourable changes in market prices such as interest rate, share prices, commodity prices and exchange rate are noted. However, controls are put in place to manage interest rate risk including gap limits, target net interest income changes, economic value of equity etc. It does not engage as a deliberate policy on speculative high risk trading activities. Nonetheless there are exposures to market risk more on local currency trading and the banking books (Banking book market risk exposures are managed more through the Bank’s Assets-Liabilities Management Committee. Similarly, exposures to the equity market are negligible compared to its asset base.

Operational Risk

The Bank defined exposure to operational risk as exposure to loss resulting from inadequate or failed internal processes, people and systems or from external events.

The Regulators introduced the fraud desk in all Banks and we are fully compliant to quickly attend to acts of fraud from our e-channels.

The Information Technology system deployed the use of Network Access Control (NAC) to minimize information theft from systems in the enterprise. Improved controls around financial applications were achieved and additional controls are being proposed to close all vulnerabilities envisaged owing to the increase in frauds on the electronic platforms across the financial industry.

Physical Security risks were treated seriously in response to reports from the Security Organizations in the Country and internal awareness raised for locations with peculiar security breaches.

The Bank has set up the process of identification, measurement, management, control and reporting of exposure to operational risks bank-wide.

The framework for risk registration and loss data management has also been set up.

Business Lines Mapping of loss data has been integrated into the loss data and risk registration framework.

The Bank has adopted the modified Basic Indicator Approach to measure its exposures to operational risk. Results of the measurement are contained below as part of the disclosure requirements.

Key Risk Indicators have been identified as proxies to measure the potential exposure to operational risk by the Bank. Loss events data base is being built up accordingly

Strategic Risk

It encompasses a variety of uncertainties which are not directly financial in nature, caused by macro-economic factors, industry trends or lapses in a firm‘s strategic choices which may turn out wrong and adversely affect the firm‘s earnings and shareholder’s value.

The Bank underwent significant changes in the year under review. A change at the helm of affairs saw the emergence of a new Managing Director and the resignation of the former. The Board further engaged the services of Price Water Cooper to assess the Bank’s resources – human and material resources with a view to re-organise these resources along the strategy it is driving.

This strategy is centred along service, people and technology. The Board is implementing a strong strategy focused on SME financing, agriculture and retail banking and this strategy is being cascaded down to the various directorates and business units for effective buy-in of all.

The Bank has taking a bold and courageous step in relocating its corporate Head Office with the approval of the CBN to Plot 42, Ahmed Onibudo Street, Victoria Island, Lagos State which is termed the commercial nerve of Nigeria in a bid to enhance services, deepen our level of market penetration in addition to positioning the Bank to compete favourably with its peers in the industry. The Bank has also re strategized to focus on the retail with renewed vigour and we believe the relocation of the headquarters to Lagos will help us achieve that goal.

Compliance and Legal Risk

Compliance risk is the possibility of loss arising from the inability of the Bank to properly align its processes and policies to the regulatory dictates cum policies of the Apex Bank and /or other regulatory bodies.

The Bank implemented both system-based and manual controls to ensure compliance with rules, regulations and laws governing operations of a financial institution in Nigeria. We have Zero-tolerance for non-compliance with Know-your-customer and Know-your-customers’ business regulations in the Bank. Officers are exposed to detailed and regular training on anti-money laundering practices to acquire relevant capacity to manage these franchise risk issues. Expert opinions are obtained from internal and external solicitors to manage legal risks in all its key decision making processes.

The bank regularly engages a consultant to carry out detailed review of the Bank’s Compliance risk management policies and processes with a view to determining the existing gaps and proffering appropriate remediation for such identified gaps in the framework.

Compliance issues are given top priority by the bank, compliance and legal risks are proactively identified and mitigated accordingly.

Reputational Risk

This risk arises from damage to the Bank's image which may impair its ability to retain and generate business. It is the potential that negative perceptions of the Bank’s conduct or business practices will adversely affect profitability, operations or customers and client.

The Bank has intensified its efforts in mitigating any risk that can affect its reputation. Part of this effort is the implementation of a strategy to ensure Customers complaints are resolved within the stipulated timelines given by the CBN with regards its categorized complaints.

A full-fledged Customers’ Care Centre has also been upgraded with adequate staffing to improve the response time to customers’ issue logging and resolution across the enterprise and has since commenced 24 hours service to customers.

A department in charge of quality management across the Bank has also been set up. This is to ensure that high service standards are maintained across the Bank and to ensure that brand losses are reversed; this department is manned by highly qualified individuals and supervised by an Executive Director.

Interest Rate Risk

Interest rate risk is the impact that changes in interest rates could have on the Bank's margins, earnings and capital. The Bank's objective for interest rate risk management is to ensure that its earnings are optimised, stable and predictable over time.

The framework outlined below describes the methodology for the identification, measurement and management of interest rate risk inherent in the Bank's traditional banking activities.

Despite the tightening liquidity situation in the economy, the Bank fared well and recorded appreciates progress.  

Interest Rate Risk Management

Interest rate risk is managed through efficient Assets-Liabilities proactive reviews carried out through Assets-Liabilities Management Committee and sound portfolio management principles incorporating transfer pricing and directed at effectively managing the Bank's mismatched positions.

The Bank manages its inherent interest rate risk mismatch through the optimal structuring of on balance sheet portfolio, (i.e. corporate, commercial and retail funding structures) with due consideration to the re-pricing gaps between rate sensitive liabilities and rate sensitive assets. Note 45 to the financial statements shows an analysis of the interest rate risk in the Bank.

Interest Rate Risk Identification and Measurement

Interest rate risk exposure in the Bank is being identified and measured through the use of traditional re-pricing gap, sensitivity and economic value analyses. In addition, simulation/sensitivity analysis techniques are being developed to assess interest rate risk/reward profile.

Re-pricing gap analysis refers to the mismatches that result from timing differences in the re-pricing of assets, liabilities and off balance sheet instruments. The exposure shall be measured by both static and dynamic gap analysis, based on current and projected balance sheet as well as off balance sheet structures.

Sensitivity analysis - to understand the impact on net interest income arising from possible changes in rates, a sensitivity analysis shall be performed. The sensitivity analysis shall cover a variety of possible interest rate scenarios including scenarios capturing likely and extreme economic developments impact on movements in interest rates as a way of stress testing the Bank's net interest income.

Foreign Exchange Risk

Foreign exchange risk refers to losses that could result from changes in foreign currency exchange rates. Unity Bank is exposed mainly to non-trading foreign exchange risk when there is a mis-match between foreign currency assets and liabilities: foreign currency assets greater or less than its liabilities in a particular currency, creating a foreign currency open position. The following table shows the impact of currency gap

An adverse change in foreign exchange rate therefore, will have direct impact on the Bank's reported net income and equity, and also its capital ratios. Accordingly, the Bank's primary objective shall be to minimize these impacts.


The focus of Enterprise Risk Management in Unity Bank is to identify material risks that could affect the Bank’s objectives and manage them in an integral basis across the enterprise following the evaluation of their potential impact.

The framework runs on a platform of policies and processes that can proactively identify, measure, manage, control, monitor and report on enterprise risk exposures in the Bank on an integrated basis.

The Bank has continued to carry on its implementation of risk management policies during the period under review.

During the Financial Year ending 31st December 2015, Unity Bank Plc upgraded its certification to the ISO 27001 Standards version 2013 from the previous versions – ISO 27001:2005. The Bank first certified to ISO 27001 in 2012; it passed all surveillance audits and went further by upgrading to the latest version of the standards evidenced with the issuance of a certificate by the British Standards International (BSI). The Bank also sustained its PCIDSS certification and upgraded to the version 3.0 of the Certification which is currently the Industry Best Practice. Improved controls around Payment Cards Data transmission and storage of these information were tested, vulnerabilities were measured and adequately mitigated using approved scans, vulnerability assessment and also penetration testing.

The Bank is currently expanding the scope of its ISO 27001 Certification to cover its e-business Department and Disaster Recovery Site. This is in a bid to securely manage information exchange, build a culture of security and protect the company, its assets and reputation. The scope expansion will also help the Bank improve its ability to recover operations and continue business in case of an event and improve the overall organizations security awareness.

The Bank’s strategy to improve service delivery across the enterprise and in meeting regulatory requirements as contained in the CBN IT Standards Blue-print, engaged the services of consultants to see it through to attaining ISO 20000 global standards for Information Technology Service Management (ITSM).

With respect to credit risk management, the Bank has continued to maintain the credit workflow engine, successfully deployed in the prior year.


Reducing unacceptable performance variability, aligning and integrating the varying Risk Management, building confidence on investment, community and stakeholders, enhancing corporate governance, successfully responding to a challenging business environment and aligning strategy with corporate culture led the Bank along the path of training its’ Board of Directors and Executive Management on Anti-Money Laundering/Combating the Finance of Terrorism (AML/CFT) bearing in mind the statutory and regulatory industry best practice. Subsequent to year end, the Enterprise Risk Management training for the Board Members and Executives was postponed but hitherto held in February, 2016.

Enterprise Risk Management Framework

Risk Governance Structure



Thank You.


 Mrs Patricia Chinwe Ahunanya -

Group Head, Enterprise Risk Management


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