MAGYAR NEMZETI BANK
3.5 OPERATIONAL RISKS The principle of dual materiality is also essential for the physical operations of the central bank. The operations of the central bank can be affected by both transition and physical risks and at the same time the bank’s operation also has an impact on the environment. • For example, transition risks have an impact on changes in the price of energy used or business travel, which can lead to higher operating costs. • Physical risks can have a negative impact on the MNB’s buildings, for example high summer temperatures can damage infrastructure, making business continuity difficult. • The MNB’s operations generate GHG emissions and other environmental footprints, which have a negative impact on the environment and thus pose a reputational risk to the MNB. The MNB manages its transition risks and impact on the environment by measuring and reducing its carbon footprint. In respect of physical risks, operational risk management activities are carried out in accordance with the rules developed on the basis of the European Central Bank’s methodology, as set out in the MNB’s Operational Risk Management Manual. Achieving the MNB’s objectives is a strategic task, and preserving its reputation and assets is a key value. An efficient operational risk management system plays an important role in the protection of these objectives and values. As chance, certain undetected errors and unforeseeable external circumstances also play a role in the occurrence of risk events, this creates uncertainty in the MNB’s operations. The objective of operational risk management is to manage this uncertainty effectively and to provide the decision-making processes with as comprehensive information as possible. Direct risks arising from the MNB’s operations may also be affected by the impacts of climate change and environmental degradation. Activities related to operational risk management and business continuity management are decentralised within the MNB. Accordingly, the Directorate for Banking Security plays a coordinating role, with the actual activities being carried out by the business lines. The business areas are required to prepare their risk maps, in which they collect operational risks related to their processes and activities, and to maintain an event register, in which they keep a record of operational risk events that have occurred. Once a year, Banking Security (BS), in cooperation with the business areas, assesses and evaluates the operational risks of the MNB. The assessment is based on a self-assessment by the departments concerned, in the course of which the departments assess the risk exposure to potential risk events of the work processes they carry out or plan to carry out in their objectives, or of the projects they supervise, which is summarised by BS at the MNB level. The assessment represents the departments’ perception of themselves in relation to the risks, but its results are also reconciled between departments where necessary. The assessment focuses on the potential frequency and impact (both financial and non-financial) associated with a given risk event or process. Based on the results of the assessment, the impact of risk events (business, property, reputational) and their probability of occurrence are classified according to the risk tolerance matrix on the risk map. The assessment data is part of the MNB’s operational risk database and is analysed by BS. In consultation with the business areas, BS prepares an annual report on the evaluation of the risk assessment for the Governor, as a member of the EB, in which it reports on the overall operational risk situation of the Bank, with a particular focus on residual risk. In the context of the identification and management of residual risks, the business areas must consider whether or not it is worth proposing action on a cost/benefit basis. The Governor decides on the MNB’s risk appetite, the acceptable level of residual risk, the adoption of additional risk mitigation measures and the approval of the annual operational risk report.
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THE MAGYAR NEMZETI BANK’S CLIMATE-RELATED FINANCIAL DISCLOSURE • MARCH 2022
