Annual Report 2017

85 2. Risk management in all aspects SET recognizes the importance of overseeing and managing all key risks which may affect SET’s business operation. The risk management is in line with COSO 1 Enterprise Risk Management Framework and those of leading exchanges. Key risk indicators (KRIs) of all key risks are set for monitoring and reviewing risk mitigation plan as deemed appropriate. All these risks cover strategic, operational, financial and compliance aspects, as follows: Strategic risk SET focuses on strategic risk management covering SET’s long-term strategic direction and annual strategic planning and budgeting. SET’s strategic risk management includes not only the process of reviewing and recommending by the RMC prior to the BoG’s consideration, but also monitoring the implementation of strategic plans related to key objectives in each aspect, including new products and services. These include the regular progress report to the BoG. New products and services in 2017 are such as (1) developing FundConnext to facilitate the access to mutual funds easily, conveniently, quickly and of high standard; and (2) being an intermediary in the payment system for the capital market, the SET group acting as the payment hub for brokers and commercial banks to efficiently enhance the industry’s payment service. Financial risk SET categorizes key financial risks into: credit risk (counterparty or clearing and settlement-related risk) and investment risk. Credit risk (Counterparty or clearing and settlement- related risk): During 2017, Thailand Clearing House Co., Ltd (TCH), as central counterparty (CCP) for SET and Thailand Futures Exchange PCL (TFEX), has been continuously committed to enhancing risk management in line with international standards and best practice continuously. In 2017, TCH assessed the risk value of liquidity risk both in securities market and derivatives market. This was to ensure that TCH has adequate liquidity for any situation. TCH also validated the reverse stress test both for credit and liquidity to assess circumstance of inadequate financial resource and liquidity. In addition, starting from November 2017, TCH has implemented guidelines on pending settlement mechanism in handling the default in securities deliveries to prevent debit balance in compliance with the international standards. In addition, TCH has also set guideline on risk management of Gold-D futures, with 99.99% gold underlying physical delivery. These include roles and responsibilities of related parties covering members, delivery agent, and vault operator, to strengthen the confidence of all parties in the deposit and delivery process of gold. Investment risk SET’sinvestmentportfolio,managedbytheInvestment Committee (IC), operates under investment and strategic asset allocation policies as approved by the BoG. In addition, SET monitors the investment risk status and reports to the IC, RMC, Audit Committee (AC) and BoG regularly to ensure that risks are within the acceptable level. 1 The Committee of Sponsoring Organizations of the Treadway Commission (COSO)