319 How We Are Governed Financial Statements Shareholders’ Information Additional Information 50. FINANCIAL RISK MANAGEMENT (CONT’D.) (d) Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or resulting from external events. Operational risk is managed through an effective operational risk management framework which include development of policies, processes and procedures for managing operational risk in the Group, independent review of the risk management function by internal audit and oversight by the management and Board of Directors. The operational risk management processes include identifying and assessing operational risks of the Group and operational risk loss data collection to track the factual information which can assist the organisation and business and support units to effectively understand where their real risks exist, identify control weaknesses, underlying causes and introduce controls to strengthen the weaknesses. Any actual, near-miss or potential losses from any operational risk loss events are to be reported to Management. 51. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value measurement The Group and the Bank use the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 - quoted (unadjusted) market prices in active for identical assets or liabilities. Level 2 - other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3 - techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
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