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Integrated Annual Report
of ING Bank Śląski S.A. 2019

Risk control and management system in financial reporting process

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Financial statements are developed by the CFO Division, with this process being one of the key elements of compliance. The basic components enabling the performance of the process encompass: the Accounting Policy adopted by the Bank's Management Board and an accounting framework within the Bank which defines the main principles of recording business events at the Bank. Recording of events leads to the formation of the Bank's books, which, in turn, are the basis for the development of financial statements.

The Bank identified the following risks in the financial statements development process:

  • risk of incorrect input data,
  • risk of inappropriate presentation of data in financial statements,
  • risk of use of incorrect estimates, and
  • risk of lack of integration of IT systems and operating and reporting applications.

To mitigate the aforementioned risk, the Bank structured the process of financial statements development in two layers: application- and content-related ones.

The application part of the process comprises the flow of data from the Bank's core operating systems via various interfaces to a reporting database which hosts reporting applications. The application layer is controlled in line with the IT systems security policy adopted by the Bank. The following elements are controlled: user management, development environment management and integrity of data transmission systems, including the correct operation of interfaces in terms of the completeness of data transfer from operating systems to a reporting environment.

To ensure its adequate management, the Bank described the process of financial statements development in line with the principles binding at the Bank. The description covers the workflow, its actors and the “if… then…” situations. It also indicates the key financial statements development process controls, which include but are not limited to:

  • quality control of input data for financial statements, supported by data control applications; a variety of principles concerning data correctness, error correction track and close monitoring of data quality were defined in the applications;
  • control of data mapping from source systems to financial statements ensuring correct data presentation;
  • analytic review based on specialists’ expertise, the main objective of which is to confront business know-how with financial data and identify potential indicators of incorrect data presentation or incorrect input data, if any.

The estimates adopted by the Bank and compliant with the IAS/ IFRS were detailed in the Accounting Policy. To avoid the risk of incorrect estimates, the Bank adopted the following solutions:

  • to estimate loan impairment – the Bank implemented specific models and applications as well as internal regulations for credit risk assessment;
  • to measure debt financial instruments quoted in active markets or in the case of which valuation is based on those quotations – the Bank implemented the required functionality of core systems; furthermore, the control exercised by market risk management units was instituted;
  • to estimate provisions for a legal risk related to Swiss franc indexed mortgage loans – the Bank estimated expected losses based on a scenario analysis assuming the expected number of court cases and possible court decisions;
  • to estimate the impact of the change in the interpretation of regulations concerning the return of a consumer loan commission – assumptions were adopted with regard to expected outflows due to complaints and prepayment profiles based on historical data;
  • to measure financial instruments not quoted in active markets – the Bank implemented valuation models which had been subject to validation before application;
  • to estimate pension and disability provisions – the Bank commissioned an independent actuary to prepare an estimate;
  • to estimate provisions for bonuses for employees and executive staff – the Bank uses calculations in line with the General Terms and Conditions of Bonus Award adopted at the Bank, considering forecasts regarding the Bank's results;
  • to appraise own properties – the Bank adopted a rule that the appraisal is obtained from independent experts every three to five years.

The accounting principles have been detailed in the Annual Consolidated Financial Statements in the section called “Accounting policies and additional explanatory notes” and “Material principles of accounting”.

The Bank's organisational structure makes it possible to retain the segregation of duties between the Front Office, Back Office, Risk and Finance. In addition, the institution of an adequate internal control system enforces the implementation of control of transactions and financial data in the Back Office and support units. The area is subject to the independent and objective assessment performed by the Internal Audit Department in terms of adequacy of the internal control system and risk management as well as in terms of corporate governance.

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