The Board / committee set up for the purpose shall monitor on a monthly basis, the movements in their book-to-equity ratio for listed NBFCs and the coupon at which long-term and short-term debts are raised by them. The management of liquidity risks relating to certain off-balance sheet exposures on account of special purpose vehicles, financial derivatives, and, guarantees and commitments may be given particular importance due to the difficulties that many NBFCs have in assessing the related liquidity risks that could materialise in times of stress. E) The stress scenario for LCR intends to cover a combined idiosyncratic and market-wide shock that would result in: run-off of a proportion of deposits (in case of deposit taking NBFCs); a partial loss of unsecured wholesale funding capacity; a partial loss of secured, short-term financing with certain collateral and counterparties; additional contractual outflows that would arise from a downgrade in the NBFCs credit rating, including collateral posting requirements; increases in market volatilities that impact the quality of collateral or potential future exposure of derivative positions and thus require larger collateral haircuts or additional collateral, or lead to other liquidity needs; unscheduled draws on committed but unused credit and liquidity facilities that the NBFC has provided to its clients; and. E) All assets in the stock of liquid assets must be managed as part of that pool by the NBFC and shall be subject to the following operational requirements: must be available at all times to be converted into cash; shall not be co-mingled/ used as hedges on trading position; designated as collateral or credit enhancement in structured transactions or designated to cover operational costs; shall be managed with sole intent for use as a source of contingent funds; and. The process of identifying, measuring, monitoring and controlling liquidity risk should include a robust framework for comprehensively projecting cash flows arising from assets, liabilities and off-balance sheet items over an appropriate set of time horizons. While there is a heavy emphasis on technology, the level of digital maturity an organization has is also impacted by speed and adaptability, largely due to resources in human capital and automated processes. We'll be creating an interactive PDF that includes navigation and links to referenced material. Take the next steps in your organizations end-to-end implementation with our Zero Trust Guidance Center docs for deployment, integration, and app development best practices. iii) Liquidity Costs, Benefits and Risks in the Internal Pricing. Alex Simons, Corporate Vice President for Identity Security at Microsoft, and Steve Turner, analyst at Forrester Research, discuss the adoption of Zero Trust and offer practical advice for organizations to get started. Use of tools such as structured risk-culture surveys can allow for a deeper understanding of nuances of risk culture across the organization, and their results can be benchmarked against peer institutions to reveal critical gaps. The time buckets shall be distributed as under: b) NBFCs would be holding in their investment portfolio, securities which could be broadly classifiable as 'mandatory securities' (under obligation of law) and other 'non-mandatory securities'. The role of the ALCO with respect to liquidity risk should include, inter alia, decision on desired maturity profile and mix of incremental assets and liabilities, sale of assets as a source of funding, the structure, responsibilities and controls for managing liquidity risk, and overseeing the liquidity positions of all branches. Compliance risks are driven by the same underlying factors that drive other banking risks, but their stakes are higher in the case of adverse outcomes (for example, regulatory actions that can result in restriction of business activities and large fines). Contingency plans should contain details of available/ potential contingency funding sources and the amount/ estimated amount which can be drawn from these sources, clear escalation/ prioritisation procedures detailing when and how each of the actions can and should be activated, and the lead time needed to tap additional funds from each of the contingency sources. RIMS Risk Maturity Model ERM Framework. Corporate debt securities (including commercial paper) and the securities having usual fundamental and market related characteristics for HQLAs and meeting the following conditions: not issued by a bank, financial institution, PD, NBFC or any of its affiliated entities; have a long-term credit rating from an eligible credit rating agency between A+ and BBB- or in the absence of a long-term rating, a short-term rating equivalent in quality to the long-term rating; traded in large, deep and active repo or cash markets characterised by a low level of concentration; and. Governance and Compliance are critical to a strong Zero Trust implementation. This document recommends the Secure Software Development Framework (SSDF) a core set of high-level secure software development practices that can be integrated into each SDLC implementation. Please provide any questions or comments utilizing the contact form. However, this model has offered a limited understanding of the business operations and underlying risk exposures, as well as of how to practically translate regulatory requirements into management actions. The Risk IT Framework fills the gap between generic risk management concepts and detailed IT risk management. Access to Apps should be adaptive, whether SaaS or on-premises. Considering the unique nature of the balance sheet of the NBFCs, stressed cash flows is computed by assigning a predefined stress percentage to the overall cash inflows and cash outflows. The risk assessment feeds into the policy engine for real-time automated threat protection, and additional manual investigation if needed. BSIMM also includes a robust community where members share best practices and exclusive content, and collaborate with security peers. We are improving the safety, value, and performance of railways and roads, today and in the future. In most cases banks need to transform the role of their compliance departments from that of an adviser to one that puts more emphasis on active risk management and monitoring. Further, NBFCs in their annual financial statements under Notes to Accounts, starting with the financial year ending March 31, 2021, shall disclose information on LCR for all the four quarters of the relevant financial year. Additionally, the scope of regulatory focus continues to expand. We are an Open Access publisher and international conference Organizer. NBFCs shall adopt a stock approach to liquidity risk measurement and monitor certain critical ratios in this regard by putting in place internally defined limits as approved by their Board. Utilizes fully data-driven integrations; optimizing across all channels, touchpoints, and departments. Tools commonly used to drive business value, such as cloud technologies and automation, require an IT infrastructure that can support these systems. The guidelines deal with following aspects of Liquidity Risk Management framework. 4As defined in the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, 6A Significant counterparty is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the NBFC-NDSI's, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs, 7A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/products which in aggregate amount to more than 1% of the NBFC-NDSI's, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs. Each control is documented and its level of effectiveness qualitatively assessed (although the definition of effectiveness is often ambiguous and varies from person to person). They can redefine the way you operate. Stress testing shall form an integral part of the overall governance and liquidity risk management culture in NBFCs. Risk Level: How high of a priority the risk is based on your risk matrix. Navaln et al. This work is licensed under the Creative Commons Attribution-ShareAlike 3.0 License, Download the BSIMM Trends & Insights report, Configuration and Vulnerability Management. To safeguard sensitive national security information, the Department of Defense (DoD) launched CMMC 2.0, a comprehensive framework to protect the defense industrial bases (DIB) sensitive unclassified information from frequent and increasingly complex cyberattacks. The Business Model Canvas is a strategic management template used for developing new business models and documenting existing ones. The market related characteristics of HQLAs include active and sizeable market; presence of committed market makers; low market concentration and flight to quality (tendencies to move into these types of assets in a systemic crisis). 1Liquidity Risk means inability of an NBFC to meet such obligations as they become due without adversely affecting the NBFCs financial condition. An opportunity to share our learnings as a regulator and promote best practice with other industries on how RM3 can be used to improve management system maturity. (III) Assets to be considered for HQLA with a minimum haircut of 50%: i. The Chief Risk Officer, appointed by the NBFC in terms of our circular DNBR (PD) CC. Many banks still struggle with the fundamental issues of the control environment in the first line of defense such as compliance literacy, accountability, performance incentives, and risk culture. As you evaluate your digital maturity, consider all factors including the needs of the business, internal and external stakeholders, customers then develop a digital technology strategy that drives business growth while optimizing spend. If you have any questions, please contact the RM3 team. For more information, please contact RM3@orr.gov.uk. We believe this approach makes RM3 more accessible and meaningful as a tool to help organisations identify what they can do to improve the maturity of their safety management system. Where application security leaders come to reduce their software risk Building Security In Maturity Model (BSIMM) helps organizations plan, implement, and measure their software security initiatives. To deliver ORRs objectives for RM3, ORR will: The ORR chaired RM3 Governance Board (RM3GB) supports ORR in ensuring that RM3 remains relevant to industry. An NBFC shall publicly disclose information (Appendix I) on a quarterly basis on the official website of the company and in the annual financial statement as notes to account that enables market participants to make an informed judgment about the soundness of its liquidity risk management framework and liquidity position. The site can be accessed through most browsers and devices; it also meets accessibility standards. Alternatively, creating a digital maturity model without data-driven insights, or a pulse on manual versus digital processes, makes it hard to assess which areas are most critical in driving transformational change. NBFCs shall also adopt the above cumulative mismatch limits for their structural liquidity statement for consolidated operations. c) Asset-Liability Management Committee (ALCO). Our framework, key trends, and maturity model can accelerate your journey. d) The Statement of Structural Liquidity may be prepared by placing all cash inflows and outflows in the maturity ladder according to the expected timing of cash flows. There is purpose and strategy behind digital transformation activities but only in some, not all, areas of business. Mergers, Acquisitions and Divestitures Strategy, Technology Implementation, Support & Maintenance, HIPAA Due Diligence for HealthTech Acquisition, 43% of highly digital mature companies see significantly higher net profits. iv) Extension of liquidity risk management principles. Attacks happen at cloud speed your defense systems must act at cloud speed and humans just cant react quickly enough or sift through all the risks. The internal controls required to be put in place by NBFCs as per these guidelines shall be subject to supervisory review. Its an organizations ability to take on digital transformation not only from the standpoint of digital technology, but organization-wide, including people, culture, and processes, to achieve business outcomes.. 2 IRR is one of seven supervisory risk areas that examiners assign as part of the examination.. 3 The Examiners Guide section on Interest Rate Finally, compliance activities tend to be isolated, lacking a clear link to the broader risk-management framework, governance, and processes (for example, operational-risk management, risk-appetite statement, and risk reporting and analytics). Therefore, its only fitting that a modern compliance framework needs to be fully integrated with the banks operational-risk view of the world. Indicative liquidity ratios are short-term liability to total assets; short-term liability to long-term assets; commercial papers to total assets; non-convertible debentures (NCDs) (original maturity less than one year) to total assets; short-term liabilities to total liabilities; long-term assets to total assets; etc. Analyze current digital tactics and the wish list of those that would make output, customer interaction, teams automated, streamlined and more efficient. The BSIMM is a management tool for serving such a purpose. Empower your users to work more securely anywhere and anytime, on any device. A) In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below. Assess where you are today and determine what your target or landing point is; use that as another boundary condition. With rapidly accelerating software development practices, BSIMM12 data illustrates the actual shifts taking place in security development programs. Further, as a matter of prudence, all other NBFCs are also encouraged to adopt these guidelines on liquidity risk management on voluntary basis. NBFCs, however, are expected to monitor their cumulative mismatches (running total) across all other time buckets upto 1 year by establishing internal prudential limits with the approval of the Board. In addition to the liquidity risk management principles underlining extant prescriptions on key elements of ALM framework, it has been decided to extend relevant principles to cover other aspects of monitoring and measurement of liquidity risk, viz., off-balance sheet and contingent liabilities, stress testing, intra-group fund transfers, diversification of funding, collateral position management, and contingency funding plan. No.102/03.10.001/2019-20, All Non-Banking Financial Companies (NBFCs) including Core Investment Companies (CICs), Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies. Are infants born after an episode of suspected preterm labor at risk of attention deficit hyperactivity disorder? A maturity assessment also provides an indication of strengths, weaknesses, opportunities, and threats. Both human and non-human identities need strong authorization, connecting from either personal or corporate Endpoints with compliant device, together requesting access based on strong policies grounded in Zero Trust principles of explicit verification, least privilege access, and assumed breach. Our community of professionals is committed to lifetime learning, career progression and sharing expertise for the benefit of individuals and organizations iii) Adoption of stock approach to liquidity. As a result, digital maturity is more important than ever. In designing liquidity stress scenarios, the nature of the NBFCs business, activities and vulnerabilities should be taken into consideration so that the scenarios incorporate the major funding and market liquidity risks to which the NBFC is exposed. The Statement of Structural Liquidity is currently one of the prescribed monitoring tools.In addition to this, the following tools shall be adopted by the Board of the NBFC for internal monitoring of liquidity requirements: This metric is meant to identify those significant sources of funding, withdrawal of which could trigger liquidity problems. It shall capture the details of the amount, type and location of available unencumbered assets that could serve as collateral for secured borrowing in secondary markets. Currency Risk. The setting of SMART objectives will provide focus, direction, set expectations, and form a key working pillar of the RM3GB who are required to deliver within set timescales. Bi-annual review internal. Much like Maslows Hierarchy of Needs, you can apply it to anything. To implement and communicate an agreed framework of how suggested enhancements and improvements to the model are put forward to ensure robust control and effectiveness whilst maintaining quality. Flexible. Explore resources for federal agencies to improve national cybersecurity through cloud adoption and Zero Trust. In chemistry, a solution is a special type of homogeneous mixture composed of two or more substances. Non-deposit taking NBFCs with asset size of 100 crore and above, systemically important Core Investment Companies and all deposit taking NBFCs (except Type 1 NBFC-NDs2, Non-Operating Financial Holding Companies and Standalone Primary Dealers) shall adhere to the guidelines as mentioned herein below. Microsoft has adopted a Zero Trust strategy to secure corporate and customer data. If you would like information about this content we will be happy to work with you. An NBFC should conduct stress tests on a regular basis for a variety of short-term and protracted NBFC-specific and market-wide stress scenarios (individually and in combination). Provided that NBFCs shall have the option to use their stock of HQLA, thereby allowing LCR to fall below 100% during a period of financial stress. Given this evolution, responsibilities of the compliance function are expanding rapidly to include the following: Risk culture has a special place in the compliance playbook. Integrating the management of these risks offers tangible benefits. Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, Master Direction - Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016, Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company, Deposit taking Company (Reserve Bank) Directions, 2016, Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016, Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016, circular DNBR (PD) CC. 3Liquidity means NBFCs capacity to fund the increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses. MORE INSIGHTS ON DIGITAL BUSINESS TRANSFORMATION, Proprietary Software Development can be a Significant Asset or can Impede Growth and Agility. F) NBFCs should periodically monetize a proportion of assets through repo or outright sale to test the saleability of these assets and to minimize the risk of negative signalling during period of stress. Such support groups will be constituted depending on the size and complexity of liquidity risk management in an NBFC. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy. While some of the current regulatory prescriptions applicable to NBFCs on ALM framework have been recast below, a few additional features including disclosure standards have also been introduced. Please refer to paragraph 108 and paragraph 94 of Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, and Master Direction - Non-Banking Financial Company Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016, both dated September 1, 2016, respectively. The telemetry and analytics feeds into the Threat Protection system. In practice it means expanding beyond offering advice on statutory rules, regulations, and laws and becoming an active co-owner of risks to provide an independent oversight of the control framework. Risk IT Framework. At the end of each module you can download a certificate of completion. ORR protects the interests of rail and road users. For example, where significant to the LCR, NBFCs could discuss: (a) the main drivers of their LCR results and the evolution of the contribution of inputs to the LCRs calculation over time; (b) intra-period changes as well as changes over time; (c) the composition of HQLAs; (d) concentration of funding sources; (e) derivative exposures and potential collateral calls; (f) currency mismatch in the LCR; (g) other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers to be relevant for its liquidity profile. Consider the following characteristics of digital maturity: From increased efficiency to improved quality, digital maturity drives outcomes that fuel business growth. Large amounts of telemetry and analytics enriched by threat intelligent generates high quality risk assessments that can either be manually investigated or automated. The 1-30 day time bucket in the Statement of Structural Liquidity is segregated into granular buckets of 1-7 days, 8-14 days, and 15-30 days. To strengthen the understanding of the model which will provide consistency on the effective use of RM3. Move from perimeter-based data protection to data-driven protection. The traditional compliance model was designed in a different era and with a different purpose in mind, largely as an enforcement arm for the legal function. Improving the quality and clarity whilst reducing the risk of differing interpretation. Even though a lot of work has been done to respond to immediate pressures, the industry needs a more structural answer that will allow banks to effectively and efficiently mature their risk-and-control frameworks to make them more robust and sustainable over time. This model highlights four stages of digital maturity: Nascent, Emerging, Connected, and Multi-Moment. An emerging best-practice model for compliance in banking needs to rely on three core principles to address these challenges. Developed by the Office of Rail and Road in collaboration with the rail industry, the Risk Management Maturity Mode (RM3) encourages organisations to achieve excellence in health and safety management. All promoting investment in the rail network, Benchmarking National Highways' performance and efficiency, National Highways licence monitoring and enforcement, Our role in the development of road investment strategies, The environment, sustainable development and rail, The environment, sustainable development and roads, ORR corporate sustainable development activity, All environment and sustainable development, Apply for permissions, certificates or authorisations, Railway infrastructure and vehicle safety, Infrastructure access guidance and policies, Appeals under The Access and Management Regulations, Third party liability insurance notifications, Health and safety guidance and compliance, RM3 2019 - The Risk Management Maturity Model (pdf 1.5 MB), RM3 2019 - The Risk Management Maturity Model - Topic set 1 - Heritage Railways - Version 1 2021 (pdf 836.01 KB), Risk Management Maturity Model (RM3) Assessment Toolkit Spreadsheet - Updated 2 December 2020 (xlsx 520.73 KB), Risk Management Maturity Model (RM3) Workshop - 6 December 2019 (pdf 6.04 MB), Transport for London RM3 assessment sheet - 6 December 2019 (xlsx 3.03 MB), Office of Rail and Road and Heritage Railway Association Risk Management Maturity Model (RM3) London seminars 2019 (pdf 5.39 MB), Risk Management Maturity Model (RM3) York Workshop - 2 December 2019 (pdf 4.94 MB), ORR Risk Management Maturity Model (RM3) 2019 - presentation from launch events (pdf 5.48 MB), RM3 Organisational culture template (Word version) (docx 81.19 KB), RM3 Organisational culture template (ODT version) (odt 75.3 KB), identify areas for continuous improvement, and, providea benchmark for year-on-year comparison.
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