ECIC AR 2024 9TH

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E Integrated Report 2024 Risk Management Risk Framework ECIC has an elaborate risk framework that comprises a suite of policies, procedures and processes that holistically seek to manage risk within the Corporation’s risk appetite. The Corporation’s strategic themes include sound risk management that ensures the Corporation remains sustainable in both the short- and long-term. Global trends in a post-COVID world are important in so far as a forward-looking assessment of risk eligibility in regions/geographies, sectors and obligors is concerned. The forward-looking tripwires and early warning signals have assisted the Corporation to identify potential high-risk opportunities and to put in place commensurate risk sharing/transfer mechanisms to fully eschew risk or to restrict risk within acceptable levels. Over-indebtedness in countries on the African continent poses high emerging risks for the Corporation. Traditionally, ECIC being an insurer of last resort, has built an underwriting portfolio predominantly comprising of countries with weak credit ratings. In the wake of sovereign defaults in countries on the Corporation’s portfolio, there has been an urgent need to relook at the Corporations underwriting criteria and risk appetite limits to protect the balance sheet. The Board composition in terms of skills and experience ensures that Board oversight remains effective in augmenting management decision-making when the Corporation navigates difficult risk terrain. Regular interactions with regulatory bodies in the financial services sector have enabled the Corporation to embrace and institute sound risk management and compliance practices that ensure continued support to policy holders. ECIC Board Risk Oversight The Risk Committee of the Board exercises delegated oversight responsibility from the Board on all risk-taking opportunities of the Corporation. The Combined Assurance Plan which incorporates functions across the three lines of defence, and is monitored by both the Risk and Audit Committees, has evolved over the years and provides varied risk perspectives to Board. X P O R T C R E D I T I N S U R A N C E C O R P O R A T I O N O F S O U T H A F R I C A S O C L T D

Table 16: Integrated Assurance Model

1st Line

2nd Line

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Business Processes

Risk Function Head Actuarial Function (HAF) Compliance Function

Internal Audit External Audit

Risk Management ECIC’s business landscape traverses different geographies and regions as well as industries and obligors. As a result, the Corporation strives to manage the various disparate risks that could arise in a transaction, within the different risk categories. To ensure achievement of a holistic view of risk, there is a need to delineate all risks as set out below: Country Risk Country risk is the risk that an investor in a foreign jurisdiction may not be able to receive monetary value duly due to them from their investments and/ or loans arising from acts of commission and/or omission by a host. As part of its country risk management strategy, the Corporation’s country risk assessment and management methodology combines qualitative and quantitative methods comprising primary and secondary research, with the latter taking into consideration the published material from multilateral development agencies (MDAs). The key metrics that underpin country risk assessments include economic and exchange control considerations, sovereign debt analysis and government policy. In a post-COVID world, some of the countries in ECIC’s underwriting portfolio have become heavily indebted, which has led to sovereign defaults in some countries. The risk of over-indebted sovereigns is an emerging risk, as ECIC’s underwriting portfolio contains exposures to such countries. Going forward, the Corporation has revised its underwriting criteria and risk

appetite limits to ensure sustainable underwriting in the tough economic environment.

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