Internal Audit: An activity, independent of operational units and objective, that provides an organization with assurance regarding the degree of control over its operations, offers advice for improvement, and contributes to creating added value. It helps the organization achieve its objectives by systematically and methodically evaluating its risk management, control, and corporate governance processes and making proposals to enhance their effectiveness.
Audit Committee: An emanation of the deliberative body responsible for assisting it in carrying out its missions, in particular the evaluation of the quality of internal control, the verification of the reliability of the information provided by the executive body and external auditors and the relevance of accounting methods, as well as the assessment of the consistency of the systems for identifying, measuring, monitoring and managing risks and proposing, where appropriate, avenues for improvement.
Risk Committee: A specialized committee within the governing body responsible for advising the latter on the overall risk management strategy of the regulated institution.
Ongoing Monitoring: A mechanism that allows for the regular verification of the activities of operational units to ensure the regularity and security of operations carried out, as well as compliance with other due diligence requirements related to the monitoring of risks of all kinds associated with these operations.
Consolidating Entity: An entity that consolidates the accounts of the group to which a subsidiary located in the CEMAC region belongs. It may or may not be a credit institution.
Regulated Institutions: Credit institutions and financial holding companies.
Financial Holding Company: An entity defined in Article 1 of Regulation No. 01/15/CEMAC/UMAC/COBAC concerning the supervision of financial holding companies and cross-border monitoring.
Governing Body: The structure that defines the strategic direction of the institution and ensures the effective oversight of the management of activities on behalf of the shareholders. This refers to the board of directors as defined in article 2 of regulation no. 04/08/CEMAC/UMAC/COBAC cited above.
Executive Body: The body comprising all individuals responsible for the day-to-day management of the institution's activities and the effective steering of the process for achieving the strategic objectives set by the governing body. It consists of all individuals responsible for the overall management of the institution, in accordance with Article 15 of Regulation No. 02/15/CEMAC/UMAC/COVAC/CM of March 27, 2015, amending and supplementing certain conditions relating to the practice of banking in the Central African Economic and Monetary Community.
Business Continuity Plan: A written and detailed action plan describing the procedures and systems necessary to continue or restore an organization's operations in the event of a disaster or disruption.
Emergency Financing Plan: A set of policies, procedures, and action plans designed to respond, in a timely manner and at a reasonable cost, to serious disruptions in an institution's ability to finance some or all of its activities.
Risk: A circumstance or event that could have adverse consequences for the institution's situation and, in particular, threaten the achievement of the objectives set by the governing and executive bodies.
Intermediation Risk: The risk of default by a principal or counterparty in a financial instrument transaction where the reporting entity provides a settlement guarantee.
Basis Risk: The risk between the movement of an underlying asset and the movement of the hedge.
Foreign Exchange Risk: The risk incurred due to currency fluctuations in on- and off-balance-sheet transactions.
Concentration Risk: The risk resulting from the accumulation of very high outstanding amounts with:
i) Single counterparties and groups of counterparties that are directly or indirectly related;
ii) Counterparties operating in the same industry, economic sector, or geographic region;
iii) Counterparties whose financial results depend on the same business activity or commodity, or the same off-balance-sheet exposures (including guarantees and other commitments). This also includes concentrations of market risks and other risks, where a reporting entity is excessively exposed to asset classes, products, securities or currencies.
Credit Risk: The risk incurred in the event of default by a counterparty or counterparties considered related parties within the meaning of Article 28 of COBAC Regulation R-2014/01 of March 21, 2014.
Excessive Leverage Risk: The risk of vulnerability of a regulated institution resulting from leverage or potential leverage that may necessitate corrective measures not anticipated by the institution, including an emergency sale of assets that may result in losses or a revaluation of remaining assets.
Liquidity Risk: The risk that the institution may be unable to meet its obligations or to unwind or offset a position.
Market Risk: The risk of price fluctuations in any instrument listed on a market.
Risk of Non-Compliance: The risk of judicial, administrative or disciplinary sanctions, significant financial loss or reputational damage, arising from non-compliance with provisions specific to banking and financial activities, whether legislative or regulatory in nature, or professional and ethical standards, or instructions from the executive body taken in particular in application of the guidelines of the deliberative or non-deliberative body.
Settlement Risk: Risk incurred, particularly in foreign exchange transactions, during the period between the point at which the payment instruction for a sold financial instrument can no longer be unilaterally cancelled and the final receipt of the purchased instrument.
Interest Rate Risk: Risk incurred in the event of changes in interest rates across all on- and off-balance-sheet transactions.
Legal Risk: Risk of litigation with a counterparty resulting, in particular, from any inaccuracy, omission, or deficiency of any kind that may be attributed to the institution in its operations.
Model Risk: Loss that may be incurred due to decisions that may be based primarily on the results of internal models, due to errors in their development, implementation, or use.
Operational Risk: Risk of losses resulting from the inadequacy or failure of internal processes, personnel, and systems, or from external events. Operational risk includes legal risk but excludes strategic and reputational risks.
Residual Risk: Risk that remains after all preventive and protective measures have been implemented, particularly after a significant portion of the risk that can be managed through internal controls has been eliminated.
Systemic Risk: The risk of disruption to the financial system that could have serious negative repercussions on the financial system and the real economy.
Internal Control System: A set of measures approved by the governing body and implemented by the executive body and all staff of a regulated institution to ensure that its activities are properly controlled at all levels to enable it to achieve the objectives set by the governing body.