Risk management

ALTUM manages all risks inherent to its activities. To ensure adequate risk management, ALTUM has established a Risk Management System (hereinafter referred to as RMS) in compliance with the regulations binding for credit institutions [1], while assessing the degree of their application according to the specific nature of ALTUM’s business. Risk management is coordinated by an independent structural unit which is not involved in the day-to-day operations.

The established RMS ensures preventive risk management and timely implementation of corrective measures to mitigate or eliminate risks. ALTUM applies various risk management methods and tools and sets risk limits and restrictions. Risk management methods are selected considering the significance of a particular risk and its impact on ALTUM’s activities.

The RMS provides regular information, allowing to assess both the actual level and the potential level of risk, enabling timely responses to mitigate the impact of risks on ALTUM’s performance. Stress testing of the significant risks is carried out regularly to assess the impact of risks on ALTUM’s operations that may arise from various internal and external adverse events. The significant risks are identified by analysing available qualitative and quantitative historical information as well as by analysing ALTUM’s planned activities.

ALTUM has developed a Risk Management Policy (hereinafter referred to as the Policy), risk assessment procedures and methodologies. The internal regulatory framework is systematically reviewed and improved as necessary.

The purpose of the Policy is to set out the guiding principles of the RMS, i.e. the set of means to be used by ALTUM to minimise the likelihood of loss in cases where the financial, material, intellectual and human resources invested by ALTUM are not used effectively, repaid or recovered in time or in full, or ALTUM suffers other losses or does not make the expected profit.

ALTUM has a conservative and prudent risk management policy, which sets out the principles of risk management in general, as well as the principles for managing the significant risks inherent to ALTUM’s activities. The policy is approved by the ALTUM Supervisory Board and is regularly reviewed and, where necessary, improved.

General principles of risk management

1. ALTUM manages all risks inherent to its activities. Within the framework of RMS:
   • ALTUM ensures identification, assessment, management and control of the risks inherent to its activities;
   • The organizational structure for risk management has been established, and respective distribution of responsibilities in risk management has been introduced;
   • Respective management information system has been developed.
2. ALTUM maintains a list of risks inherent to its activities that have been identified in ALTUM’s products (services), risk transactions, procedures, systems and/or other activities and/or operations (hereinafter referred to as processes, systems and or other activities and/or operations – collectively referred to as activities (operations)). The risks inherent to ALTUM’s activities and their definitions are included in the risk list.
3. ALTUM develops and maintains Risk Management Strategy that sets the strategic goals of the risk management and/or risk limits.
4. By undertaking risks, ALTUM maintains its long-term capability to implement the goals and tasks set for ALTUM operations.
5. ALTUM does not provide products (services), does not engage in risk transactions and/or does not carry out other activities (operations), that pose risks, threatening stability of ALTUM operations. i.e. may harm ALTUM reputation considerably.
6. ALTUM identifies and assesses potential risks before introducing new products (services), conducting activities (operations) or risk transactions, and develops and ensures implementation of the necessary risk compensation/loss coverage mechanisms. In cases where the use of risk compensation/loss coverage mechanisms is not possible, ALTUM does not introduce such products (services) or perform such activities (operations) or prices such products (services) or activities (operations) in a way that the potential risks are fully compensated by the client in to avoid extraordinary losses in its business.
7. ALTUM ensures that it has sufficient own funds to cover the significant risks inherent in its activities, by assessing the extent of potential losses associated with those risks and by constantly monitoring the amount and adequacy of actual own funds.
8. ALTUM, where necessary, lowers the risk limits or even discontinues provision of the product (service) or the conduct of the risk transactions and/or other activities (operations) if they are assessed as too risky, as well as if it is not possible to put in place sufficient and/or leverage additional risk compensation/loss coverage mechanisms and/or to provide the product (service) or conduct the activity (operation) at a price that covers the associated risks and ALTUM’s potential losses.

9. In order to assess ALTUM’s risks, mathematical and statistical methods and models, as well as stress testing, are used to assess the impact of external and internal factors on the risks inherent to ALTUM’s activities and the level of those risks. For each risk, risk management and control methods are applied that are appropriate to the level of risk. For risks that cannot be assessed quantitatively, ALTUM applies qualitative assessment methods.
10. For the significant risks, ALTUM develops internal regulatory documents that define the specific aspects of the management of the respective risks.
11. When executing risk transactions or other activities (operations), ALTUM separates the functions of initiation, approval (authorisation), recording, valuation and control of the risk transactions or other activities (operations). They are performed by different staff members.
12. ALTUM employees, in accordance with their mandate and competence, know their clients and fully understand the content and nature of each specific risk transaction or activity (operation), and are able to identify and assess the associated risks and find the optimal solution for both the client and ALTUM.
13. ALTUM develops and maintains a risk reporting system within the RMS that provides operational and/or regular information on the significant risks, their assessment, the control methods implemented, including the risk objectives, risk limits and their actual volume, as well as the amount of capital requirements for each significant risk and the total amount of capital requirements for all risks and changes. 

Risk assessment process

In order to assess the impact of the risks inherent to ALTUM’s operations, an annual assessment of all risks is carried out, including stress testing.

The risk assessment, including stress testing, identifies the significant risks inherent to ALTUM’s activities, assesses the significant risks and stress tests the potential impact of each risk on ALTUM’s activities, taking into account the specific factors affecting each risk.

[1] including, but not limited to, EU directives and regulations, regulations of the European Banking institutions, the Basel Committee on Banking Supervision and the Financial and Capital Markets Commission, which are binding for credit institutions, ensuring risk management.