CFSL Integrated Report 2025

95

Introduction

Group Overview

Leadership

Strategy & Performance

Risk Management Report (Continued)

Our Principal Risks Cim Finance’s principal risks are summarised in the table below, along with their evolution during FY 2025. We also provide a detailed overview of each risk and the measures implemented to manage and mitigate them.

FINANCIAL RISKS

The risk of financial loss arising from a borrower’s or counterparty’s inability to meet contractual obligations as they become due.

Credit Risk

Risk Response/Mitigation Measures

Robust Credit Risk Framework: Comprehensive credit policies, prudential limits, and risk metrics are in place to guide lending decisions and manage exposures. Risk-Based Decisioning: Credit decisions are made using a risk-based approach, with higher-risk or complex applications escalated to higher credit authorities. Credit Risk Mitigation Tools: Use of credit insurance and other risk transfer mechanisms to reduce exposure. Portfolio Diversification: Credit exposures are diversified across sectors and borrower profiles to minimise concentration risk.

Provisioning Strategy: A forward-looking provisioning approach ensures adequate reserves are maintained to absorb potential credit losses. Monitoring and Early Warning: Continuous monitoring of credit scorecards and policy adherence, with early identification of deteriorating exposures. Borrower Support: Assistance is provided to customers facing temporary financial hardship to support recovery and reduce default risk. Governance and Oversight: Credit exposures are reviewed by the Debtors Monitoring Committee, Portfolio & Credit Risk Forum, and Risk Analytics Forum to ensure timely interventions and strategic oversight.

Potential negative outcomes arising from decisions based on incorrect or misused model outputs, including design errors and data limitations.

Model Risk

Risk Response/Mitigation Measures

IFRS 9-Compliant Models: Utilisation of robust models for Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD), aligned with IFRS 9 standards. Regular Model Updates: Models are periodically updated to incorporate the latest performance data and forward-looking macroeconomic variables.

Independent Model Governance: The Risk Management team independently maintains and oversees model development, with validation support from external subject-matter experts. Performance Monitoring: Performance reviews of credit scorecards and ECL models are conducted on a continuous basis. Comprehensive Documentation: Detailed model documentation is maintained to ensure transparency, consistency, and accountability.