BAKU, Azerbaijan, October 20.
Risk management in the financial sector is no longer limited solely
to financial risks; risks related to information security, cyber
threats, environmental and social factors, as well as corporate
governance, are becoming increasingly significant, Deputy Chairman
of the Central Bank of Azerbaijan (CBA) and member of the
Management Board, Toghrul Aliyev, said at a conference on
Sustainable Business, Corporate Governance, Risk, and Compliance
(GRC) in Baku on Tuesday, Trend’s correspondent reports from the event.
According to Aliyev, in the operations of organizations, risk
management and decision-making are defined not only by financial
outcomes but also by the approach taken toward risks, the
principles underlying decisions, and the preservation of
stakeholder trust.
He pointed out that the GRC framework, which integrates
corporate governance, risk management, and compliance, is an
important institutional mechanism that supports the long-term
development of organizations, as well as the stability of the
financial system in the context of the CBA’s operational focus
areas.
He remarked that shifts in the global economic environment
further underscore the importance of this approach. Accurately
assessing the impact of economic, geopolitical, technological, and
environmental factors on the business landscape is essential for
the timely identification of risks, the making of well-founded
decisions, and agile adaptation to changing conditions.
The deputy chairman of the CBA emphasized that the Central Bank
has identified the GRC framework as a core priority within its
financial sector development strategy for 2024–2026.
According to him, banks, insurance companies, and investment
firms are among the key sectors where corporate governance, risk
management, and compliance standards are systematically applied.
The requirements established for financial institutions serve to
enhance their resilience and strengthen overall confidence in the
sector.
"Strong corporate governance and effective risk management not
only bolster the resilience of individual financial institutions
but also contribute significantly to strengthening confidence in
the financial sector as a whole. The resilience of individual
financial institutions and the stability of the financial sector at
large are closely interconnected," he explained.
Aliyev mentioned that the CBA, while basing its approach on
international standards, adapts regulatory requirements to align
with the development level, needs, and specific characteristics of
the local market.
He also highlighted that the Central Bank has transitioned to a
risk-based supervisory approach, underpinned by the Azerbaijan Risk
Assessment System (ARAS). He noted that GRC principles constitute
one of the core components of this approach.
"In this context, our objective is to ensure the agile
development of risk management systems, compliance mechanisms, and
internal controls, aligned with the level of risk," the CBA’s
deputy chairman emphasized.
According to him, the scope of the concept of compliance today
extends beyond mere adherence to legal and regulatory requirements
or efforts to combat money laundering and the financing of
terrorism.
Aliyev noted that compliance serves as a vital mechanism within
organizations, guiding the development of a risk culture, the
application of responsible governance principles, and the making of
sound decisions. Integrating compliance into the decision-making
process not only enhances the quality of governance but also
fosters institutional trust.
The deputy chairman of the CBA added that the development of
artificial intelligence, tokenization, and new digital services
makes the presence of robust governance mechanisms even more
critical. These technologies can only generate sustainable value if
the associated risks are managed effectively.
He stressed that the Central Bank has established requirements
for the management of various financial risks, including credit and
liquidity risks:
"Furthermore, within the framework of modern risk management,
the comprehensive assessment and management of non-financial risks,
alongside financial risks, are becoming increasingly important," he
added.
