8.2 Organizational structure

The organizational structure of risk management system is consistent in PZU Group's individual insurance companies and includes four competence levels:

• the Supervisory Board, which supervises the risk management process and assesses its adequacy and effectiveness as part of its decision-making powers defined in the given company’s Articles of Association and the Supervisory Board rules and regulations;
• the Management Board, which organizes the risk management system and ensures its functionality through approving the strategy and policies and defining the risk appetite, the risk profile and tolerance for individual categories of risk;
• Committees, which make decisions on reducing individual risks to a level determined by the risk appetite. The Committees implement the procedures and methodologies for mitigating the individual risks and accept individual risk limits.

The fourth competence level relates to operational actions and is divided between the three lines of defense:

• the first line of defense – ongoing risk management at the business unit and organizational unit level and decision-making as part of the risk management process;
• the second line of defense – denotes risk management by specialized units responsible for risk identification, monitoring and reporting, as well as controlling limits;
• the third line of defense – comprises internal audit, which conducts independent audits of the elements of the risk management system, as well as control activities embedded in the activity.

In the risk management process at Alior Bank, management board and supervisory board of Alior Bank, as well as Assets and Liabilities Management Committee play an active role.

The Supervisory Board oversees the risk management process by determining an annual strategy in this respect, e.g. by accepting market risk management strategy, including main risk limits, and controlling the compliance of Alior Bank risk policy with the strategy and financial plan.

The Management Board of the Bank is responsible for e.g.: supervising the risk management process, risk monitoring and reporting; specifying proper organization and division of duties, accepting policy and guidelines related to risk management and determining detailed limits for reduction of Alior Bank risk, as well as providing a proper mechanism for controlling the limits and notifying when they are exceeded.

The key assumptions of market and liquidity risk management strategy at Alior Bank are included in the assets and liabilities management policy which is drafted on annual basis and presented by the Management Board of Alior Bank to the Supervisory Board of Alior Bank for approval as a part of the process of approving year budget. The strategy is in place by the times of the next update.

The Assets and Liabilities Management Committee exercises daily control over market risk management, including liquidity risk, accepts limits of Alior Bank operations on money and capital markets. It makes all decisions provided that they have not been previously qualified as exclusive competence of Alior Bank management board or supervisory board.