Weigh the risks or lose your balance
Media Room

Interview with Mr. Andranik Barseghyan, Management Board member and the head of the Risk Management Center at Ameriabank CJSC

-- Mr. Barseghyan, what is the niche that risk management issue occupies in Ameriabank?
-- The risk management issue for any reasonable economic system and entity is as important as profit making. For the commercial banks operating in unstable economies it is a number-one issue to handle in order to achieve long-term development goals. Risk management issue in Ameriabank ranks equal to profit-making and customer focus since any activity the banks runs is based upon understanding, weighing and managing of risks. This is an issue that concerns each bank employee and not only the top management or risk managers. Smooth relationships between horizontal business units are a key to the success of the risk management and control in our bank. I’d like to stress that any efficient risk management system is based upon mutual transparency and cooperation of all bank units, accurate information, professional approach, qualified HR, pluralism of opinions and impartial management, all the factors that are a priority for Ameriabank. In such environment risk management is not only an easy but a favorite thing to do with much room for creativity.
-- How does the bank build its risk-related policy? Which risks are currently most pressing?

-- The common approach to risk management policy assumes system development in various directions somewhat adjusted to the bank profile. The long-term and sustainable development may be achieved by a reasonable share of conservatism and precise assessment of own capacities. Against the background of instability worldwide and the pressure of both competitors and clients, the choice of decision-making strategic model predominates over the obsession with easy money.
Like any other Armenian bank, Ameriabank is more sensitive to credit risks due to the asset structure specifics where the main income generating source is loan portfolio. Other risks underlying the risk or cash flow management system of the bank are market and operational risks, liquidity risk and reputational risk standing apart from the bank’s performance. The Basel standards that have been implemented by Armenian banks set comprehensive approaches to the risk management systems in the banks.
-- Ameriabank perked up SME and consumer lending. How did it reflect upon the credit risk management issue?
-- Both SME financing and consumer lending activities are aimed at diversification of the loan portfolio, decrease in its concentration and credit risk mitigation on the portfolio level. This doesn’t mean however that the associated risks are less important or shouldn’t be controlled. Loan risk management issue is unavoidable in the import-dependent countries with traditionally high inflation. We identified SME development options, potentially risky sectors and less risky directions for the small and medium-size businesses in Armenia. So the bank isn’t going to blow up SME lending bubble. We have determined which are the priority and secondary sectors for us. Moreover, as a client-oriented bank we are committed to a long-term cooperation with clients, identification of their needs and mutual transparency which is a good risk mitigation instrument. As regards consumer lending, it is quite profit-yielding and promising in times of growing economy.
-- The risk management issues came to the fore in the wake of downturn. I wonder whether the banks need risk management systems for risk minimization in hard times or reduction of dependence on economic cycles.
-- The bank depends on the economic movements and its environment any way. The risk management unit’s function is to be pro-active, implement the adopted risk management policy, demonstrate comprehensive approach to the whole process coordination, assess risks and recommend alternative solutions. The modern financial world without a risk manager is similar to a mountain climber without harnesses. You should weigh the risks cautiously or you are going to lose your balance.
Mr. Barseghyan, we know that Ameriabank’s team has won the Online Bank Management Contest (OBMC) Europe 2011. You were recognized the best bank also by risk management system among such leading European banks as ING and Dexia which was recognized as the Best Managed Bank OBMC 2010. Congratulations! We wish you to win the global final to be held in New York in August where your team will represent Europe.

-- Thanks for congratulations and kind wishes. We’ll do our best.

Updated 07.06.2011, 15:06
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