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88 Annual Report 2012
Enterprise risk management
SET has adopted enterprise risk management to identify, analyze, evaluate, monitor and manage risks. The risk
management framework covers strategic, operational, financial, compliance, and business interruption risks.
SET has also emphasized continuous improvement of enterprise risk management. In 2012, SET improved its risk
governance to more closely adhere to best practices of leading international exchanges. Moreover, enhancing enterprise risk
management will be one of SET’s major strategic plans for 2013.
Strategic risk
SET has focused on strategic risk, covering those for launching products or services. SET has adapted its identifying,
reviewing and monitoring systems to manage risks that may occur. In 2012, SET emphasized risk management of SET
CONNECT, new trading system, which was launched in September. Risk management of this system included several tests with
all related parties to ensure that it passed all essential criteria before starting implementation.
Operational risk
SET analyzes, evaluates, monitors and manages operational risk, which results from errors in using people, internal
processes, technology or external factors. All functional areas assess their risks and adequacy of the internal controls that have
been in place through a Risk and Control Self-assessment (RCSA). Action plans are then formulated and monitored on
regular basis.
SET analyzes, evaluates, monitors and manages risks that may affect crucial computer systems. This includes standard
procedures of incident reports, root cause analysis and solution-finding in order to provide continuous services.
Financial risk
SET has divided financial risk into two categories: investment risk and credit risk, with the latter also being known
as counterparty or clearing and settlement-related risk. The details are below.
Investment risks
SET’s investment portfolio, which is managed by the Investment Committee, operates under investment policies
and strategic asset allocation as approved by the SET Board of Governors (BoG). The policies and strategic asset allocation
are reviewed quarterly.
SET manages investment risk by diversifying into several financial instruments and limiting the proportion given to each
financial institution and issuer to ensure that the exposure affecting investment results will be limited. The value-at-risk
technique is used to ensure that the aggregate portfolio risk is within the limit structure. SET invests in these instruments:
mutual funds, government bonds, bank deposits, money market funds and corporate bonds with at least an “A” credit rating.
SET monitors the investment risk status of its portfolio and reports such status to the BoG and Risk Management
Committee monthly to ensure that risk remains within acceptable levels.