Operational risk and compliance

Compliance with laws, contracts, regulatory policies and investment guidelines is enforced to ensure that the Bank does not suffer a loss arising from a breach of any of the aforementioned. Daily, weekly, monthly and quarterly compliance requirements are monitored at various levels of the Bank’s compliance framework.

The SARB is a risk-averse institution. Owing to its unique role and functions, risk management is not solely based on risk and return considerations but also takes into account public interest in line with the SARB’s statutory and constitutional responsibility.



The Bank has policies, processes and procedures in place to identify, analyse, measure and report on the financial risks that affect it in performing its functions and how such risks are monitored and managed. The Bank identifies, quantifies and evaluates the risks associated with its activities on a daily basis. As far as reserves management operations are concerned, the SARB’s risk tolerance is specified and implemented through its Investment Policy, Strategic Asset Allocation, active risk budget and Investment Guidelines. The framework for domestic market operations is specified in the Operational Notice.


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Financial risk management 
Risk management approach

A prudent approach to risk management for domestic and foreign operations is adopted through limiting investment activities to high quality assets, a specifically considered set of sovereigns, pre-defined currencies, diversification across assets and sectors, and appropriate collateral. This is achieved by formulating a well-researched Strategic Asset Allocation and a sound set of investment guidelines.

Risk identification, measurement, management, monitoring and reporting

Financial risks are identified and analysed by the Financial Markets Department using market information and risk models. The Department values its financial assets at fair value on a daily basis. Market risk in respect of foreign reserves is measured by calculating risk metrics such as duration, Value at Risk and tracking error.

Credit risk is largely managed by specifying risk limits. However, during the crafting of the Strategic Asset Allocation, the Bank selects countries that display strong macroeconomic fundamentals and fit with its overall investment philosophies. Monitoring financial risks is conducted at all levels (e.g. Portfolio and Tranche level), with constant tracking of risk metrics.


Risk methodologies

Valuation methodologies are in line with market best practice to ensure that risk is measured accurately.