Policy On Control And Management Of Company Assets And Shareholder Investments

We firmly believe that it is of paramount importance to ensure that adequate policies, procedures and controls are in place to manage, utilize and safeguard the Company’s assets prudently and to uphold shareholders’ value. The policies and procedures shall specify guidelines on how to manage and invest the Company’s funds to ensure robust profit generation for the shareholders within the set risk parameters of the Company. Risk management develops and implements policies, procedures and frameworks to ensure that risks are managed within acceptable limits and in accordance with regulatory requirements.

The following committees have been established by the Board of Directors to provide guidance and oversight over the control and management of the Company’s assets and shareholder investments:

• Assets and Liabilities Management Committee (ALCO)
• Credit Committee (CC)
• Board Audit Committee (BAC)
• Board Integrated Risk Management Committee (BIRMC)
• Information Security Committee (ISC)

The operations of the committees are supported by the polices approved by the Board of Directors namely the Investments Policy, Credit Policy, Impairment Policy & Procedure (Expected Credit Loss “ECL”), Information Technology Security Policy and Risk Management Policies (Credit Risk Management Policy, Liquidity Management Policy, Market Risk Management Policy, Operating Loss Event Policy and Stress Testing Framework).

II. Role of Assets and Liabilities Management Committee (ALCO)

ALCO is mandated to oversee the management of the Company’s assets and liabilities to optimize the risk adjusted returns to shareholders over the medium to long term whilst complying with regulatory requirements and policy framework approved by the Board of Directors. The committee is responsible for managing varying market risks including interest rate risk, liquidity risk and other risks that will have an impact on the profitability and stability of the Company. ALCO is also responsible to optimize funding costs and improve the overall performance of the balance sheet.

III. Role of Credit Committee (CC)

Credit Committee (CC) is responsible to evaluate and approve/decline credit facilities as per delegated authority limits vested with the committee by the Board of Directors, review and recommend the CF Credit Policy and supervise and monitor the overall lending operations of the Company.

IV. Role of Board Audit Committee (BAC)

BAC has the oversight responsibility to review financial statements, disclosures, earning releases and system of internal controls over financial reporting to satisfy that the management has established appropriate system of internal controls over financial reporting while ensuring the financial reports are being fairly presented and the integrity of Company financial statements. To achieve its desired objectives, the BAC is required to ensure the review of the effectiveness of internal controls and work with independent internal audit to ensure integrity of the financial statements.

V. Role of Board Integrated Risk Management Committee (BIRMC)

BIRMC fosters an effective risk culture within the Company and oversees the Company’s “Integrated Risk Management Framework” for identification, assessment, monitoring and reporting of various potential risks and frauds inclusive of effective measures to control and mitigate such risks at prudent levels. BIRMC defines Company’s risk appetite through “Risk Appetite Statement” which articulates the individual and aggregate level and types of risk the Company will accept or avoid achieving the strategic business objectives. BIRMC reviews the Company’s credit risk, interest rate risk, liquidity risk, operational risk, IT risk, digital risk, regulatory risk, AML/TF risk, strategic risk, fraud risk, compliance and reputation risk exposures in relation to the risk appetite and the Company’s capital adequacy.

VI. Role of Information Security Committee (ISC)

ISC strengthens the information and cyber risk management in alignment with organizational strategy and provides recommendations to the Board, BIRMC and executive management regarding information security-related aspects of the Company. ISC maintains risks at optimal levels and provides oversight of the information security programs of the Company.

VII. Dealing with Conflict of Interest

CF “Policy & Procedure on Related Party Transactions” governs the procedure to be adopted in the event of any financial transaction, arrangement or relationship in which the Company is a participant and any related party has a direct or indirect material interest. Related Party Transaction Review Committee (RPTRC) is responsible for the review and recommendation of the related party transactions and ensure that transactions with related party are dealing at arm’s length, or not on terms that are less or more favorable to the related party than terms offered to any other party in the ordinary course of business.
The Company shall follow the related party disclosures and required shareholder approval will be obtained as per the regulatory requirements.

VIII. Serious Loss of Capital

Serious Loss of Capital occurs when the net assets of the Company are reduced to less than half of its stated capital. On such occurrence as prescribed by Section 220 of the Companies Act, No. 07 of 2007, the Board of Directors shall call an extraordinary general meeting of shareholders of the Company within twenty working days of that fact becoming known to the directors, to be held not later than forty working days form that date of calling of such meeting.

IX. Dividend Distributions to Shareholders

The Dividend Policy of the Company stipulates considerations for the distribution of profits in the form of dividends to shareholders of the Company taking into consideration retained funds and re-investment expectations. The Board has the authority to determine the dividend payout based on the after-tax profit of the Company relating to a financial year in compliance with the Dividend Policy and will be subjected to regulatory approval by Central Bank of Sri Lanka.

X. Protection of Minority Shareholders

Protecting minority shareholders is not only a matter of fairness and equity but is of profound value to the ethical management and sustainable performance of a Company. Accordingly, the Company has a governance process and endeavors to protect the interests of the minority as provided in the Companies Act No. 7 of 2007.

XI. Review of the Policy

This policy will be subject to review periodically as and when required by the CF Board.