2.8 Corporate Risk Management

2.8.1 Operational Risk Management

Under the operational risk management, operational risk factors of processes at the CBRT are assessed and reported in collaboration with business units. In addition, operational risk incidents are systematically monitored and registered in incident record reports. Accordingly, risk assessments are made through the monitoring of corrective and preventive action plans for the risks reported. Simultaneously, in line with business continuity plans, studies are carried out to revise critical processes according to changing conditions and to enhance organization and efficiency of emergency centers.

In June 2025, the CBRT amended the Main Regulation on the Organization and Duties of the CBRT to establish the Operational Risk and Process Management Division (ORPMD) under the Treasury and Corporate Operations Department to carry out activities related to process management, operational risk management, and business continuity. This new organizational structure transferred to the ORPMD the responsibilities related to business processes previously held by the Organization and Process Management Division of the Human Resources Department, and the responsibilities related to operational risk and business continuity previously carried out by the Corporate Risk Management Division of the Markets Department. The new division has initiated work on updating the relevant legislation, revising existing guidelines and documents, and raising awareness.

2.8.2 Financial Risk Management

Financial risks that the CBRT may be exposed to due to its operations are composed of credit, market and liquidity risks, and are managed in coordination with business units. A significant portion of the financial risks that the CBRT is exposed to due to its operations emerges in the course of fulfilling legal duties such as implementing monetary and exchange rate policies and managing reserves. Financial risks, which the CBRT is exposed to while implementing monetary and exchange rate policies, are a consequence of the policy objectives the Bank pursues in its capacity as the monetary authority. On the other hand, financial risks related to reserve management result from investment preferences. The CBRT manages its reserves conservatively in view of the priorities defined by the CBRT Law No. 1211.

In its operations related to reserve management and monetary and exchange rate policy, the CBRT is exposed to credit risk, defined as the possibility that a counterparty may partially or entirely fail to fulfill its obligations. Credit risk arising from the management of international reserves is managed by identifying leading international financial institutions and borrowers with high credit quality and allocating credit risk limits to these entities. Credit risk associated with monetary and exchange rate policy operations is managed by obtaining collateral covering the full transaction amount along with a specified margin. Moreover, for some transactions, the payment-after-collection method is adopted and thus, the credit risk exposure is largely minimized.

Market risk refers to the possibility of incurring a loss due to price fluctuations in financial markets. The major sources of market risk which the CBRT is exposed to are interest rates on the Bank’s reserve assets, exchange rates and gold prices. To manage the market risk arising from reserve management, the Bank has adopted the “Asset/Liability Matching” approach. Accordingly, the Bank identifies target currency composition, target duration and limits of deviation from these targets, as well as liquidity constraints, with a view to minimizing market and liquidity risks. In this context, the CBRT has managed credit, market and liquidity risks as per specified limits, and closely monitored developments likely to affect the risks incurred.