A CRO’s Perspective: Implementing, Operationalising and Governing of IFRS 9

Bogie Ozdemir

IFRS 9 is a game changer. It requires that credit loss provisions be estimated using risk-sensitive, predictive models, which are effectively variants of A-IRB models. This requires significant effort for the risk function – from development and governance of these models, to quarterly production and analysis of credit provisions. This also further blurs the roles and responsibilities between the risk and finance functions. Provisions are part of the financial disclosures, which are fundamentally the finance function’s responsibility. But they also become increasingly “risk-based”, thereby utilising and requiring the risk function’s specific risk expertise. In this chapter we will discuss development, operationalisation, and governance of IFRS 9.

We will start with the evolving role of the risk function in, and necessary partnership between, the risk and finance functions. We will cover the governance of IFRS 9. We will then discuss the IFRS 9 production process and the necessary quarterly analysis to understand the results and develop the corresponding action plans proactively. We will cover how to develop a coherent rating system for multiple purposes. We will explain in detail

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